How to Calculate Cash Runway (and When to Start Worrying)
Runway is cash on hand divided by net monthly cash burn. The number only helps if it uses real cash, not profit, and if you update it every month.
- Formula
- Cash on hand ÷ net monthly cash burn
- Use cash, not profit
- Include tax, loan repayments and inventory purchases
- Review rhythm
- Monthly, and weekly when runway is short
15+ years in finance: 100+ financial models built, €40m+ raised for clients, Forbes contributor and lecturer.
Short answer: runway is the number of months you can keep operating before cash runs out. Divide your cash on hand by your net monthly cash burn. The formula is simple. The hard part is using honest inputs.
The formula
Runway (months) = cash on hand ÷ net monthly cash burn
Net burn is the cash you spend each month minus the cash you collect. If you hold 300,000 and burn 50,000 net per month, your runway is six months. If you collect more than you spend, you are not burning cash, and runway is not the right question.
What belongs in the burn number
Most wrong runway figures come from burn that is too optimistic. Use cash movements, not your profit and loss statement:
| Include | Why it is often missed |
|---|---|
| Tax and VAT payments | They arrive in lumps, not monthly |
| Loan and lease repayments | The principal is not an expense in the P&L |
| Inventory and prepayments | Cash leaves long before revenue arrives |
| Annual subscriptions and insurance | Paid once, but they are real burn |
| Customer payment delays | Invoiced revenue is not collected cash |
Use the average of the last three months as a starting point, then adjust for known changes such as a new hire or a price increase.
Gross runway and net runway
Gross runway counts only your costs. Net runway counts your costs minus the cash you expect to collect. Look at both. Net runway is the real figure, but gross runway shows what happens if sales stall.
Why a static number misleads
Runway is not a fixed date. It changes every time costs, sales or payment terms change. A better habit is to build a short forecast of weekly cash, then check where the balance first falls below your minimum buffer. That date is your real deadline. Our guide on the cash flow gap explains what to do if the date is close.
When to start worrying
The right moment is earlier than most founders think. Raising money, renegotiating terms or cutting costs all take time. Start acting when the time needed to fix the problem is close to your remaining runway, not when it hits zero. If you plan to raise, read how to get investor-ready well before you need the cash.
Ways to extend runway
- Collect faster: tighter invoicing, deposits, shorter payment terms.
- Pay smarter: negotiate terms, not by delaying silently.
- Cut costs that do not produce revenue.
- Fix pricing or margin if unit economics are the cause. See why revenue grows but profit does not.
- Raise capital or debt only with a clear plan for how it changes the number.
A simple monthly routine
- Reconcile your bank balance.
- Update burn using actual cash movements.
- Recalculate runway and compare to last month.
- Note the biggest known payment in the next 90 days.
This routine takes less than an hour once it is set up, and it removes most surprises.
Runway is a forecast, not a promise, and this article is general information, not financial advice.
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Related questions
What is cash runway?
Cash runway is the number of months your business can keep operating with the cash it has, given your current net cash burn.
How many months of runway should I have?
There is no universal number. It depends on how long it takes you to raise money or fix your costs. Plan so that you start acting well before the last few months.
Is runway the same as profit?
No. Runway is based on cash movements. A profitable business can still have short runway if customers pay late or inventory absorbs cash.
