Runway and Burn Rate: How Long Does the Cash Last?

Runway is the most honest number in a company's finances: cash on hand divided by how fast the business burns it. It reduces every plan, every headcount decision and every revenue hope to a single figure — months remaining — and it has a way of ending debates, because everything on a P&L is negotiable except the date the money runs out. The mechanics take one division; the discipline is in which burn number you divide by.

Gross burn versus net burn

Gross burn is total monthly operating spending: salaries, rent, software, marketing, everything. Net burn subtracts revenue — the amount actually leaving the bank each month. A company spending $55,000 a month while earning $40,000 has $55,000 of gross burn but only $15,000 of net burn, and the difference is not semantics: revenue is cash that arrives without a fundraise, so it belongs in the survival math.

Runway divides cash on hand by net burn: $150,000 ÷ $15,000 is 10 months. Using gross burn instead — $150,000 ÷ $55,000, about 2.7 months — is wrong whenever revenue is material, and it is the most common runway overstatement in early-stage planning. The one thing gross burn is genuinely for is comparing cost structures between companies or periods, where the revenue line is noise you want out of the comparison.

The cash-positive boundary

When revenue meets or exceeds costs, net burn reaches zero or goes negative, and runway becomes unlimited — the constraint shifts from survival to growth. This is the boundary the revenue-coverage figure tracks: revenue as a share of expenses, $40,000 ÷ $55,000 being 73%. Every point of coverage gained is a point of burn removed, which makes coverage the single best trend line for a pre-profit company.

Two practical cautions live near this boundary. First, count revenue when cash arrives, not when a contract is signed — an annual prepaid contract is real cash, but spread it across the months it covers. Second, remember that "unlimited" lasts exactly as long as the conditions do: a cash-positive business that loses its largest client can cross back into burn territory in a single month.

The 6 and 12 month thresholds

The thresholds founders and investors actually plan against are six and twelve months. Under six is emergency territory: fundraising typically takes 3–6 months from first deck to bank transfer, so a company with five months of runway is already late to a process it cannot afford to fumble. Six to twelve is the planning zone — raise or cut soon, from a position you can still negotiate from. Twelve or more is generally healthy, and most experienced founders deliberately raise with 12+ months remaining rather than running reserves down to the wire.

These thresholds are not superstition; they are the fundraising calendar inverted. Raising from strength gets better terms than raising from desperation, and the only way to raise from strength is to start the process while the answer to "how long does the cash last" is still comfortable. The status read in the calculator exists to keep that calendar visible.

What counts as cash — and what does not

Cash on hand means money actually available: bank balances plus easily liquidated equivalents, minus anything earmarked or restricted. Undrawn credit lines are not cash — they are not cash until drawn, and drawing them changes the burn through interest. Receivables that have not cleared are not cash either; an invoice your client is 60 days late paying (see Invoice Late Fees) contributes nothing to today's runway.

The conservative number is the correct number, because runway estimates fail on the optimistic side. Every overcounted dollar of cash and undercounted dollar of burn moves the end date in the direction of surprise, and surprises at zero cash are not recoverable in the way other forecast errors are.

Runway is a moving number

The final discipline: recompute monthly with actuals, and recompute immediately whenever a plan changes materially. Hiring plans, expiring cloud credits, an enterprise deal landing early, a churn spike (see Churn and Retention) — all of these move future burn, so today's division is only valid until something changes. Cutting burn has its own arithmetic: the Subscription Cost Audit finds the recurring spend that quietly became fixed cost, and each subscription cut flows straight into the expenses line of this calculation.

Try it yourself

Open the Runway & Burn Rate Calculator and enter cash, monthly revenue and monthly expenses. You get gross burn, net burn, revenue coverage, months of runway in both months and days, and the status read against the 6/12-month thresholds. Then test the levers one at a time — cut expenses by 20%, grow revenue by 20% — and notice which one moves the runway date more. That asymmetry is where your next plan lives.