Definition
Runway is the number of months a company can keep running before its cash runs out, assuming spending and revenue stay roughly where they are.
Formula
Runway (months) = cash in the bank ÷ monthly net burn
where net burn is monthly expenses minus monthly revenue. See burn rate.
Example
You have $150,000 in the bank, spend $22,000 a month and earn $8,000.
- Net burn: $22,000 − $8,000 = $14,000
- Runway: $150,000 ÷ $14,000 ≈ 10.7 months
If you're profitable (revenue higher than expenses), net burn is zero or negative, and runway is effectively unlimited.
How much runway is enough?
A common rule of thumb is 12 to 18 months after raising money, and to act (cut costs or start fundraising) when it drops below 6 to 9 months, because raising usually takes three to six months. The right number depends on how long it takes to reach your next milestone. See how much runway do you need.
Common mistakes
- Ignoring growth. Growing revenue makes real runway longer than the formula says. Checking whether you're default alive builds that in.
- Ignoring committed costs. Hires and contracts that start soon make runway shorter.
- Bootstrapped founders forgetting personal runway. If you're not paying yourself, your own savings may run out before the company's cash does.