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Startup runway: cash divided by burn, and why that answer is optimistic
Runway is cash on hand divided by net monthly burn. The formula takes ten seconds and quietly assumes your burn is flat, your revenue lands on time, and no annual bill is hiding in month four. Dated modelling gives a shorter, truer answer.
- The formula
Runway in months = cash on hand ÷ net monthly burn.
- Where it lies
Lumpy annual costs, growing headcount and slipping revenue all shorten the real number.
- Date the outflows
A dated projection shows the actual month you hit zero, not an average.
- Raise before six months
Fundraising takes three to six months, so treat six months as the action threshold.
Worked example
| Line | Amount |
|---|---|
| Cash on hand | 240,000 |
| Monthly gross burn | 52,000 |
| Monthly revenue | 12,000 |
| Net burn | 40,000 |
| Simple runway | 6.0 months |
| With a 30,000 annual bill in month 3 | 5.4 months |
Extending runway without breaking the company
- Move annual renewals to monthly billing even at a small premium — it flattens the curve.
- Delay hires by one month each rather than cancelling a role entirely.
- Collect faster: deposits, annual prepay discounts, shorter terms.
- Cut spending that does not touch the next milestone, and be specific about which milestone.
- Renegotiate the largest three recurring vendor contracts before touching headcount.
How to model it properly
- Enter current cash as the starting balance.
- Add payroll, rent and each software contract on their real dates.
- Add annual and quarterly bills where they actually fall.
- Add revenue at a conservative level with realistic collection dates.
- Read the first date the projected balance goes negative — that is your real runway end.
- Re-run it with revenue twenty per cent lower as your downside case.
Frequently asked questions
How do you calculate startup runway?
Divide cash on hand by net monthly burn. For an accurate answer, project dated outflows and inflows and find the first day the balance goes negative.
What is a safe amount of runway?
Eighteen months after a raise is a common target; six months is the point at which raising or cutting becomes urgent, since a raise itself takes three to six months.
Should runway use gross or net burn?
Net burn if you have reliable revenue. Track gross burn as well, because revenue assumptions are the first thing to break.
Why is my real runway shorter than the formula says?
Annual bills, growing headcount and late-arriving revenue all cluster on specific dates that a flat monthly average smooths away.
Find the real date, not the average
Dated projection with a downside case, free forever.