All terms
Finance
Runway
The number of months a company can continue operating at its current rate of cash consumption before running out of money.
In plain English
How long you have before you go broke at today's spending. The single most important number for any business burning cash.
Example
$120,000 in the bank, losing $15,000 per month after revenue, runway = 8 months.
Formula
Runway (months) = Cash on hand / Net monthly burn
Why it matters
Below 12 months, your job shifts from building to acquiring customers. Below 6 months, every decision is a cash-flow decision. Below 3, fundraising or significant cost-cutting are the only real options.
Common mistakes
- Computing runway based on gross burn instead of net burn (overestimates by months)
- Forgetting to include taxes, contractor payments, and annual fees in monthly burn
- Updating runway monthly instead of weekly when below 6 months