Runway calculator

A startup has $120,000 in the bank, brings in $3,000 a month in early revenue, and spends $15,000 a month. Net burn: $15,000 − $3,000 = $12,000. Runway: $120,000 ÷ $12,000 = 10 months.

That 10-month figure is the real planning number, not the $8-month figure you'd get from cash ÷ gross expenses alone, which ignores the revenue already offsetting spend each month.

Net burn = last month's cash balance − this month's cash balance. A business with $180,000 in the bank last month and $165,000 this month burned $15,000, no separate expense tracking required.

One adjustment matters here: if a fundraise or a large one-time inflow landed during that period, subtract it out of both balances first. A business that raised $500,000 mid-month while spending $30,000 would show a cash balance that went up $470,000. Reading that as "negative burn" misses that the underlying spend rate didn't change at all. Exclude the funding event, and the real $30,000 burn is still the number that determines runway going forward.

Paul Graham, co-founder of Y Combinator, popularized a useful reframing of runway in a widely read 2015 essay: a startup is "default alive" if its current growth trajectory reaches profitability before its cash runs out, without needing to raise again, and "default dead" if it doesn't, meaning another round is required regardless of how the business performs in between.

The distinction matters because runway alone doesn't answer it, a business with 18 months of runway and flat revenue is default dead the same way one with 6 months of runway and rapidly compounding growth might be default alive. Checking default-alive status means comparing the runway calculation above against a revenue growth projection: does the gap between revenue and expenses close before cash hits zero, at the current growth rate, with no further funding assumed. For a working spreadsheet that runs this exact comparison automatically, see the startup financial model template.

A default-dead business isn't necessarily a failing one. Most venture-backed startups are intentionally default dead, spending ahead of revenue on purpose to grow faster than a self-funded pace would allow. The framework is a diagnostic, not a verdict: it tells a founder which conversation they're actually having: extend the runway or plan the next raise, rather than treating every runway number the same way.

These two numbers answer different questions but are only useful read together. Break-even tells you the sales level where profit hits zero. Runway tells you how much time you have before cash hits zero, and a business can have an entirely achievable break-even point and still run out of cash first, if reaching that point takes longer than the runway allows.

Take the $120,000-cash startup above: a break-even calculation might show it needs 8 months of ramping sales to cross break-even. Against 10 months of runway, that's a workable (if tight) plan. Against 6 months of runway, the same break-even target is now mathematically unreachable without a change to burn, price, or fundraising timeline.

The two levers extend runway through very different mechanisms, worth telling apart before choosing between them. A cost cut is immediate and close to certain, a canceled subscription or a delayed hire shows up in next month's burn exactly as planned. Revenue growth is slower and less certain, a new sales channel or a pricing change takes months to show up, and might not deliver the assumed number at all.

But the asymmetry cuts the other way over time. A cost cut is a one-time gain. Burn drops once and stays there. Revenue growth compounds, a customer acquired this month keeps generating cash every month after, and a growing revenue base makes every future dollar of burn easier to cover. A business six months from running out of cash should generally lean on cost cuts, since certainty matters most when the deadline is close. A business with a longer runway has more room to bet on revenue growth, since compounding has time to work before the certainty of a cut would be needed instead.

A single runway number hides how sensitive it is to assumptions that could easily go the other way. Running three versions side by side, instead of trusting one point estimate. Turns runway from a static fact into a decision-making tool.

Conservative: freeze hiring, cut discretionary spend by roughly 30%, assume flat or declining revenue. Base case: continue at the current burn rate with already-planned hires included. Aggressive: model a bigger bet, an accelerated hiring plan, a larger marketing budget, and see what it costs in months of runway.

Running all three through the calculator above and laying the results side by side. Monthly burn, runway, zero-cash date, for each scenario. Turns "we have 10 months" into "we have 7 months in a bad case, 10 in the current plan, and 5 if we make the hire we're considering," which is a genuinely different, more useful conversation for a founding team or a board to have.

The basic runway calculation assumes burn stays flat, which rarely holds for more than a month or two. A planned hire, a seasonal revenue dip, or a one-time expense like annual software renewals can all shift the real number well away from the simple projection.

It also treats all cash as equally available, it doesn't account for cash that's earmarked, restricted, or tied up in something like a security deposit. The number this calculator produces is a starting point for planning, not a substitute for an actual month-by-month cash flow forecast once burn is expected to change materially.

The basic runway formula assumes revenue arrives at a steady monthly pace, which breaks down for businesses with genuinely seasonal sales, a retailer doing 40% of annual revenue in November and December, or a B2B business closing most contracts in Q4 to hit annual budget cycles.

For a business like this, a single month's net burn plugged into the formula can wildly overstate or understate real runway depending on which month it's measured in. Burn calculated in a strong month looks artificially healthy; burn calculated in a lean month looks like a crisis that isn't really there. The fix is to run the calculation against a full seasonal cycle's average net burn, not any single month, and separately check the worst point in that cycle, the lowest cash balance the business hits during its lean stretch. Against a minimum operating cushion, since that trough, not the annual average, is what actually puts the business at risk.

Equity isn't the only way to extend runway. Venture debt, a loan typically available alongside or shortly after an equity round, underwritten more on investor backing and growth trajectory than on hard assets. Commonly extends runway by 12-18 months without issuing new shares. It's often marketed as fully non-dilutive, which is only partially true: lenders commonly take warrants, a small equity kicker, alongside the loan. Real dilution, just meaningfully less than raising the equivalent amount as equity would cost.

Revenue-based financing (RBF) is a separate, genuinely non-dilutive option worth knowing about for a business without institutional VC backing: repayment is tied to a percentage of monthly revenue rather than a fixed schedule, underwritten purely on predictable cash flow rather than investor relationships. Where venture debt requires the kind of backing this page's bootstrapped section describes many businesses not having, RBF is a more realistic non-dilutive lever for a revenue-generating business extending runway on its own footing.

Most runway discussion assumes a venture-backed context: raise, spend ahead of revenue, raise again. A self-funded or bootstrapped business runs the exact same formula, but the number means something different: there's no next round coming to reset the clock, so runway is closer to a hard survival limit than a planning horizon between fundraises.

For a bootstrapped business, the more useful framing is often reversed from the venture case: instead of asking "how many months until we need to raise," ask "how many months of margin for error do we have before revenue needs to cover expenses on its own." A freelancer or small business owner with 4 months of personal or business runway isn't under-funded in the venture sense. They're simply the one absorbing the risk directly, which argues for a more conservative burn posture and a lower tolerance for extended negative net burn than a startup planning around its next round.