Glossary · Finance
What is Runway?
Definition
Runway is the number of months your business can keep operating before it runs out of cash at its current rate of spending.
Runway (months) = cash on hand ÷ monthly net burn
Why it matters
Runway gives you a deadline. It tells you how long you have to reach profitability or raise more money before the account hits zero.
If you have $18,000 in the bank and your business loses $3,000 a month, your runway is six months. If you trim costs by $1,000 a month, runway stretches to nine months. If a client pays an overdue $4,500 invoice, you gain another couple of months at the original burn.
Many founders aim for at least six months of runway including personal living costs. It buys time to make decisions calmly rather than desperately.
Common mistakes
- !Counting money you expect but have not yet received as cash on hand.
- !Ignoring seasonality, so a slow winter shrinks runway faster than the average suggests.
Frequently asked questions
What is Runway?
Runway is the number of months your business can keep operating before it runs out of cash at its current rate of spending.
How do you calculate Runway?
Runway (months) = cash on hand ÷ monthly net burn
What mistakes do beginners make with Runway?
Counting money you expect but have not yet received as cash on hand. Ignoring seasonality, so a slow winter shrinks runway faster than the average suggests.
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