What is Runway Calculation?
Runway is the number of months a startup can continue operating at its current spending rate before running out of cash.
Runway is the number of months a startup can continue operating at its current spending rate before running out of cash. It's the most critical operational metric for any pre-profitable company.
Runway = Cash Balance ÷ Monthly Net Burn Rate
Net burn rate = Monthly expenses - Monthly revenue. A company with $3M cash and $250K net monthly burn has 12 months of runway.
Runway planning requires scenario modeling: what happens if revenue grows 20% slower than planned? What if a key customer churns? What if the fundraising cycle takes 6 months longer than expected?
Richard Ewing's rule of thumb: always add 6 months to your estimated time to next milestone. If you think you need 12 months of runway, you actually need 18. This buffer accounts for the inevitable surprises that consume cash faster than planned.
Why It Matters
Running out of cash is the #1 cause of startup death. Runway determines when to fundraise, when to cut costs, and when to pivot. Companies that track runway rigorously make better strategic decisions under uncertainty.
Frequently Asked Questions
How much runway should a startup have?
18+ months is ideal. 12-18 months is acceptable. Below 12 months is urgent — start fundraising immediately. Below 6 months is an emergency.
How do you extend runway?
Revenue growth, cost reduction, fundraising, or a combination. Cutting non-essential spending buys time. Revenue is the only sustainable solution.
Related Terms
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Richard Ewing is a Product Economist and AI Capital Auditor. He helps companies translate technical complexity into financial clarity.
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