How to Calculate Startup Runway (Formula & Examples)

In the fast-paced world of startups and growing businesses, cash is oxygen. Knowing your financial runway—how many months your company can survive before running out of money—is one of the most critical metrics for founders and business leaders.

Whether you are preparing for your next fundraising round or navigating an economic downturn, mastering this calculation helps you make informed, proactive decisions. Here is a complete guide to understanding and calculating your business runway.

1. What Is Runway?

Runway measures the lifespan of a business in months, assuming current financial conditions remain constant. For example, if your runway is calculated at 12 months, it means you have exactly one year before your bank account hits zero if revenues and expenses stay the same.

2. The Core Formula

At its heart, calculating runway is a simple division problem:

$$text{Runway (Months)} = frac{text{Total Cash Balance}}{text{Net Burn Rate}}$$

To find this number, you only need two key figures: Cash Balance and Net Burn Rate.

3. Step-by-Step Calculation

Step 1: Calculate Your Net Burn Rate

Your burn rate is the rate at which your company spends money. However, you must look at Net Burn Rate, which accounts for both money coming in and money going out.

• Gross Burn: The total amount of cash your business spends each month on expenses (salaries, rent, software, marketing, etc.).
• Net Burn: Your total monthly expenses minus your total monthly revenue.

$$text{Net Burn} = text{Total Monthly Expenses} – text{Total Monthly Revenue}$$

Example: If your company spends $50,000 a month on expenses and brings in $20,000 in monthly revenue, your net burn rate is $30,000 per month.

Step 2: Determine Your Total Cash Balance

Look at all of your liquid assets. This includes:

• Checking and savings accounts
• Short-term investments or easily accessible marketable securities
• Undrawn, immediately accessible lines of credit (though it is often safer to rely purely on cash)

Step 3: Divide Cash by Net Burn

Take your total cash balance and divide it by your monthly net burn rate.

Example: If you have $300,000 in the bank and a net burn of $30,000 per month: