How long does the money last?
Runway is the only number that has a deadline attached. This is the arithmetic behind it.
Months of runway
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Income covers costs at these figures, so the runway is not limited by cash. Enter a monthly cost above the monthly income to calculate one.
Net burn per month
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Income needed to break even
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Formula: cash ÷ (monthly costs − monthly income)
What the number assumes
This assumes costs and income stay flat, which they never do. Treat it as the answer to 'if nothing changes', which is the useful worst case rather than a forecast.
The formula defines the arithmetic. It does not define your business. A figure from this page is a starting point for a decision rather than the decision.
How to calculate runway
Runway is cash divided by net monthly burn, and net burn is monthly costs minus monthly income. It answers one question: if nothing changes, how many months until the money runs out.
"If nothing changes" is the assumption that makes it useful and the one that makes it wrong. Something always changes. The value of the figure is as a floor, the worst case you can state with confidence, rather than as a prediction.
Which cash counts
Money you can actually spend. Not invoices raised, not an agreed credit line you have not drawn, and not money already committed to tax you will owe. A VAT balance sitting in the current account is the most common way a runway figure comes out two months too long.
Where receivables are a large share of the picture, work out the runway twice: once on cash in hand, once including invoices you are confident of collecting. The gap between the two is the size of your exposure to one client paying late.
Why burn is lumpy and averages mislead
Costs are not smooth. Annual software renewals, tax, insurance and bonuses land in specific months, and a runway built on a twelve-month average will be optimistic in exactly the month the large payment falls. If any single month's costs are far above the average, plan against that month rather than the mean.
Income is lumpier still for project businesses. A quarter with two invoices is not the same as three quarters with eight, and the average conceals the gap where the money was not there.
What to do when the runway is short
Cost reductions act quickly, revenue increases do not. That asymmetry is what makes waiting expensive: a decision to cut taken at three months' runway has a fraction of the effect of the same decision taken at nine, because the saving only accrues over the months that remain.
The most useful exercise is to work out, in advance, what you would do at six months, at three, and at one, and what date each of those would be reached if nothing changes. Written down before the pressure arrives, those become decisions. Left until the month in question, they become reactions.
Extending runway without cutting the wrong thing
The levers, in order of how quickly they act: delay non-committed spend, renegotiate payment terms in both directions, reduce variable costs, then reduce fixed ones. Headcount is last not out of sentiment but because it is slow. Notice periods mean the saving starts months after the decision, while the disruption starts immediately.
On the income side, the fastest lever is usually collection rather than sales. Money already invoiced and not yet received is the cheapest cash available, and chasing it costs nothing but attention.
Whatever is cut, cut it once and deeply enough to matter. Repeated small reductions consume more attention than a single decision and leave everyone waiting for the next one, which is its own kind of cost.
Questions
What if income is higher than costs?
Then there is no burn and the runway is not a meaningful number, because you are adding to the cash rather than spending it down.
How much runway is enough?
The common rule of thumb is eighteen months when raising, and twelve as the point at which fundraising becomes urgent. For a self-funded business the honest answer is enough to survive your longest payment delay plus one bad quarter.
Is this gross burn or net burn?
Net. It subtracts monthly income from monthly costs, so it is the amount the bank balance actually falls by. Gross burn counts total costs and ignores income. It is the more conservative figure and worth knowing too, particularly if the income is concentrated in one or two clients.
How much runway should a business hold?
For a funded startup, eighteen months is the usual planning target, because raising takes longer than anyone expects and a raise negotiated with three months left is negotiated from a weak position. For a services business, three to six months of fixed costs is a common floor.
What is the difference between runway and a cash flow forecast?
Runway assumes nothing changes. A forecast models what you expect to change, such as a client starting, a hire landing or a payment arriving late. Runway is the sanity check underneath the forecast, and it is the number to give when someone asks how long you have.
Related calculators
Same corner of the arithmetic, different question.