Burn Rate & Runway Calculator

The Burn Rate & Runway Calculator uses two primary formulas: Runway (months) = Cash on Hand ÷ Monthly Burn Rate. Monthly Burn Rate = (Starting Cash − Ending Cash) / Number of Months. Cash on Hand is the total liquid cash available in the business bank accounts at the start of the period. Monthly Burn Rate is the average net cash outflow per month, calculated as total operating expenses minus any revenue over a given period (typically 1-3 months). For a more conservative estimate, use Gross Burn Rate, which excludes revenue: Gross Burn Rate = Total Monthly Operating Expenses. Then Runway = Cash on Hand ÷ Gross Burn Rate. The reason for dividing cash by burn is straightforward: it linearizes the depletion of cash assuming constant spending, providing a simple timeline for when funds will be exhausted if no changes occur. This calculation assumes no new funding, no revenue growth, and no cost adjustments, making it a baseline survival metric. It is calculated this way because cash flow is rarely linear, but the formula gives a clear, immediate snapshot of financial health. Always use the most recent 3-month average for burn to smooth out one-time expenses.

A 'good' runway number depends entirely on your business stage and risk tolerance. For early-stage startups, a runway of 12-18 months is often considered healthy to allow time for product development and fundraising. For more mature businesses, 6-12 months may be acceptable, but anything under 3 months is critical and demands immediate action. The key principle is that runway is not a static number—it changes with revenue, expenses, and funding. A common rule of thumb is to maintain at least 6 months of runway to weather unexpected downturns. However, no universal 'good' number exists; instead, track the trend: a decreasing runway over consecutive months signals trouble, while an increasing or stable runway indicates sustainability. Always compare your runway to your fundraising timeline or break-even point. Remember that this metric assumes constant burn, so if you're growing revenue, your actual runway may be longer. Conversely, if you're spending aggressively, it may be shorter. Use the gross burn rate for a worst-case scenario and net burn for a more optimistic view.

A common mistake is using gross burn when net burn is more appropriate, or vice versa. For example, a startup with significant revenue might incorrectly use gross burn, overestimating danger, while a company with no revenue might use net burn and underestimate risk. Another error is using a single month's burn rate, which can be skewed by one-time expenses like equipment purchases or legal fees. Always average over 3 months. Some founders forget to include all cash outflows, such as loan repayments or tax payments, leading to an optimistic runway. Edge cases include businesses with lumpy revenue (e.g., project-based firms) where monthly burn varies wildly; in such cases, use a 6-month average. Also, cash on hand should exclude restricted cash or funds earmarked for specific purposes. Finally, ignoring the timing of accounts payable and receivable can cause a mismatch—runway assumes immediate cash movement, but actual cash flow might differ.

Burn Rate

The rate at which a company is spending its cash reserves, typically measured monthly.

Runway

The amount of time a company can continue operating at its current burn rate before running out of cash.

Gross Burn Rate

Total monthly operating expenses, excluding any revenue.

Net Burn Rate

Monthly expenses minus monthly revenue, representing the actual cash lost each month.

Cash on Hand

All liquid cash and cash equivalents available in the business's accounts at a given point in time.