Runway

What Is Runway?

Runway measures survival time in months. The formula is straightforward: Runway (months) = Cash on Hand / Monthly Net Burn Rate. If your startup has $240,000 in the bank and spends $20,000 more per month than it earns, your runway is 12 months.

For example, a tech startup that raised $500,000 in seed funding with $8,000 in monthly revenue and $48,000 in monthly expenses has a net burn rate of $40,000. That gives the company 12.5 months of runway to reach profitability or raise the next round of funding.

Why It Matters for Your Business

Runway is the countdown clock that determines when you must either become profitable, raise more capital, or shut down.

• Urgency calibration: Knowing your exact runway prevents both panic (acting rashly with plenty of time) and complacency (discovering too late that money is running out).
• Fundraising timeline: Raising capital takes three to six months on average. Businesses typically start fundraising when they have six to nine months of runway remaining.
• Strategic decisions: Runway affects every major decision: should you hire that new employee, invest in a marketing campaign, or focus on reducing expenses to extend your timeline?

There are two ways to extend runway: increase revenue (which reduces burn rate) or decrease spending. The best approach usually combines both, focusing spending on the activities most likely to generate revenue while cutting everything else.