Why cash runway deserves regular attention
Runway turns your bank balance into a deadline. Twelve months gives you time to adjust prices, cut costs or seek funding on good terms. Three months leaves little room to do anything but react. Lenders and investors usually take longer to say yes than you expect, so it pays to act well before the money gets tight.
Track this monthly using real cash movements from your bank statements, not figures from your profit and loss report. An unpaid invoice shows up as revenue but does nothing for runway until the money arrives.
The formulas
Net burn
Net burn = Monthly cash out − Monthly cash in
Runway
Runway months = Cash available ÷ Net burn
Time to your minimum
Months = (Cash available − Minimum cash) ÷ Net burn
Worked example
A business holds $60,000 in cash, receives $15,000 and pays out $20,000 a month, and wants to keep at least $10,000 in reserve.
- Net burn: $20,000 − $15,000 = $5,000.00 a month.
- Runway: $60,000 ÷ $5,000 = 12 months.
- Time to minimum: $50,000 ÷ $5,000 = 10 months.
- With no income at all, cash would cover about 3 months of costs.
If your runway is shorter than you would like
- Collect faster. The DSO calculator shows how much cash is tied up in slow invoices.
- Trim recurring costs using the business expense calculator.
- Check your pricing. A modest rise can reduce burn quickly. See the price increase calculator.
- Line up credit early. Banks generally prefer to lend before a business is under pressure.
Frequently asked questions
How much runway should a business have?
It depends on how steady your revenue is and how quickly you could cut costs. Seasonal or project-based businesses usually need more than those with steady recurring income. Choose a figure that lets you sleep at night and act before it becomes urgent.
What average should I use?
A three- to six-month average is a good starting point. If your business is seasonal, use a full year or plan month by month instead.
What does it mean if no runway figure is shown?
Your cash in equals or exceeds your cash out, so these figures do not predict you running out. Keep an eye on the months where this could change.
Should loan repayments be included?
Yes. Runway is about cash, so include the full payment of principal and interest. The loan payment calculator can give you that figure.