Runway

Before you rely on it

What to check

Compute it on the trailing few months, not the best one, and test it with revenue flat.

The common error

Where people go wrong with runway

Modelling runway on the growth plan. If the plan slips, the runway was never as long as the board was told, and the discovery happens too late to act on.

Worked through

Runway in plain numbers

A company has $400,000 in the bank and a net burn of $40,000 a month, so it has ten months of runway. Raising money takes time, often six months or more from first conversations to cash in the bank. So the team should start when runway is still at least nine to twelve months, or the negotiation happens with the clock loud. If revenue grows and net burn falls to $30,000, runway stretches to 13 months. If the company hires and burn rises to $55,000, it shrinks to 7 months. Runway is an estimate, and it is only as good as the burn figure behind it.

Easily confused

Runway and its neighbours

Runway is not the date you run out of profits, and it is not the same as a forecast of cash; it divides unrestricted cash by net burn to give months of life at the current pace. A cash forecast models each month with expected changes. Runway differs from burn rate, the speed of spending. Zero-cash date is the calendar date when cash would reach zero, which is the runway applied to today's date. Default alive describes a business whose growth would reach profitability before cash runs out.

In real decisions

Where runway turns up

Founders and boards track runway monthly, and investors ask for it in diligence; it guides when to raise money, cut costs or slow hiring; companies set minimum runway policies, such as always keeping more than twelve months. Comparing scenarios shows how a decision affects the date. Lenders and partners view low runway as a risk. The number focuses attention on what the business must accomplish before cash runs out.

Know the edges

Where runway stops being reliable

The figure assumes a steady burn, and burn changes with revenue, hiring and seasonality. Receivables and payables timing can distort a single month. It ignores committed future costs such as annual contracts. Restricted cash should be excluded. Use a range with best- and worst-case burn, and update it whenever plans change.

Quick answers

What people ask about runway

How much runway should I have? Many founders aim for twelve to eighteen months after a raise, and start raising again with at least six to nine months left. Fundraising takes longer than expected.

How do I extend runway? Cut costs, raise revenue, delay hires, negotiate terms or raise capital. Each has trade-offs, and a small change in burn can add months.

Does runway include debt? Only unrestricted cash counts. Undrawn credit lines are optional funding and are usually shown separately.

What if runway is shorter than the time to raise money? Cut costs quickly, seek bridge funding or focus on revenue. Waiting reduces bargaining power, so start early.

Should I count committed revenue in runway? Runway is based on net burn, which already includes revenue received. Contracted but uncollected revenue is a forecast and belongs in a cash plan, not in the base figure.