Runway (Months, Net Burn)
Number of months a company can keep operating on its current cash before reserves run out, after netting monthly revenue against monthly spend.
◆ Months
Formula
What it measures
How many full months of operations current cash can cover at the average net cash burn, where net burn is total cash out minus total cash in. It assumes burn and revenue hold steady, with no new funding. Net burn — not gross burn — is used, so any recurring revenue extends the runway. Months are rounded down to the last full month.
Why it matters
Runway is the survival clock for any pre-profitability company. It tells the leadership team and investors exactly how long there is to hit the next milestone — product-market fit, positive unit economics, breakeven, or the next round — before the cash runs out. It anchors every spend decision: a new hire, a marketing push, or an infrastructure upgrade is not just a cost, it is weeks shaved off the clock. Investors ask for it first because it signals both risk and urgency.
How to read it
Read runway as a countdown, not a static number, and always against your plan. If your plan reaches breakeven in 16 months but you hold 12 months of runway, you have a capital gap — close it before the gap closes you. Recalculate every month with fresh cash and burn; small moves in either swing the timeline hard. A 12-month runway built on accelerating burn is shorter than it looks, while flat or falling burn quietly extends it. Stress-test under pessimistic assumptions (slower growth, higher churn, weaker conversion) before committing major spend, and act early: 24 months of runway rarely means you can wait 24 months, because market timing and competitive pressure compress the real window.
What good looks like
Good
12+ months of net-burn runway with stable or shrinking burn and a clear path to profitability or the next raise; room to invest without existential pressure.
Watch
6–12 months of runway, or burn accelerating faster than revenue; start the raise or cost-restructuring plan now, not later.
Bad
Under 6 months of runway, or net burn rising while cash falls; immediate action required — cut burn, accelerate revenue, or close funding within the current planning cycle.
Watch-outs
- Using gross burn instead of net burn — or mixing them up. Net-burn runway subtracts recurring revenue and is the realistic figure when revenue is stable; gross-burn runway ignores revenue and is the conservative floor. A startup with $5M cash, $500K/month gross burn, and $450K/month revenue has 10 months gross but 100 months net. Pick the right one for the question and label it clearly.
- Assuming burn stays flat when it is actually accelerating. A 12-month runway based on this month's net burn evaporates if next month's hiring pushes spend up. Recalculate monthly and stress-test against your real spend plan, not last month's snapshot.
- Counting cash that is not actually available. Restricted reserves, escrow, minimum bank balances, unvested investor commitments, term sheets, and customer LOIs are not spendable cash. Base headline runway on money in the bank and back out anything that is tied up.
- Treating runway as a fixed deadline. Companies do not collapse the month runway hits zero — they cut spend, rush a raise, or wind down weeks into negative cash. Runway is a warning, not a cliff: act when 6–9 months remain, not at zero.
Worked example
Hypothetical
A SaaS startup holds $3.2M in cash. It spends $200K a month and collects $50K in recurring revenue, for net burn of $150K. Runway = $3.2M ÷ $150K = 21.3 months, so 21 full months before cash runs out, assuming burn and revenue stay flat and no new funding arrives.