How to Calculate Runway
What is Runway?
Calculates months until cash runs out at current burn rate. Critical metric for venture-backed companies managing financing rounds.
Step-by-Step Guide
- 1Calculate current cash balance
- 2Determine monthly cash burn (expenses - revenue)
- 3Divide: cash balance ÷ monthly burn
- 4Result shows months until cash depletion
Worked Examples
Input
$500k, $50k/mo spend
Result
10 months
Common Mistakes to Avoid
- ✕Not accounting for forecasted revenue growth in runway
- ✕Ignoring seasonal cash flow variations
Frequently Asked Questions
What runway is acceptable?
Ideally 12-18 months to next funding or profitability; 9-12 months is concerning, <6 months critical.
How do I extend runway?
Reduce burn by cutting costs, increase revenue, raise capital, or improve cash collection.
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