Ask a founder how long the company can survive and you'll often get a shrug. Ask a bookkeeper the same question and you'll get a number. The gap between those two answers is where panic lives. Runway isn't a mysterious metric reserved for people who enjoy financial modeling. It's one division problem, plus a few judgment calls about what to count. Here's how to build a number you can trust in a single afternoon, and keep trusting as the months roll by.
Runway is the number of months your company can keep operating at its current spending rate before cash reaches zero. It assumes nothing changes: same team, same software, same rent, same revenue. Reality will change, but a fixed starting point is what makes the number useful, because next month you need something to compare against.
Two inputs shape it: how much cash you have, and how fast that cash is leaving. Both are knowable. Neither requires a finance degree. What does require care is deciding which expenses belong in the calculation and which revenue you're allowed to believe.
Most founders need exactly two equations:
Net monthly burn = total monthly expenses − revenue collected that month
Runway (months) = cash in the bank ÷ net monthly burn
Say you have $420,000 in the bank. Your team, tools, rent, and contractors cost $85,000 a month. Customers paid you $30,000 last month. Your net burn is $55,000, and your runway is 420,000 ÷ 55,000, which is 7.6 months. Round down rather than up. Half-months are not real life.
Note what you divide by. Net burn, not gross. Using total spend instead of spend minus revenue makes your runway look roughly a third shorter in this example, which is the safe direction to be wrong in, but it also hides how much your revenue is actually doing.
Gross burn is everything that leaves the account in a month: payroll, taxes you withhold, contractors, rent, cloud hosting, insurance, legal, travel, the coffee subscription nobody remembers signing up for. It's the honest total of running the business.
Net burn subtracts money that came in during that same month. If net burn is negative, revenue covered all your costs and you're running a surplus. Your runway is technically unlimited, and the interesting question stops being survival and becomes how fast you want to reinvest.
Most early-stage companies have a positive net burn, and that's fine. Just know which number you're quoting when someone asks.
You don't need software. A single sheet with one row per month is enough.
Fill in month one, then drag the formulas across. If you'd rather not guess at future revenue, hold it flat. Flat is honest. Optimistic is not.
Your biggest lever is usually hiring. Add one row for "planned hires" and leave it at zero. When you want to test a decision, put the monthly cost there and watch the runway column move. That single toggle answers more strategy questions than most board decks.
Annual contracts, seasonal sales, and one-off deals make single-line forecasting useless. Build three columns instead of one: a base case using revenue you've already collected, a conservative case at roughly half of that, and an optimistic case that includes deals you expect to close but haven't.
Your real runway lives between the conservative and base cases. If you can't survive the conservative case, the optimistic case is not a plan. It's a hope with a spreadsheet attached.
Any of these can cut your real runway by weeks. Together they can turn nine months into five, and you'll find out at the worst possible moment.
Once the sheet is live, update it on the same day every month, right after you reconcile the bank account. Ten minutes, same day, no exceptions. Then write down what the number tells you.
Twelve months or more usually means you can spend on growth with some confidence. Six to nine months means you should be talking to investors or lenders now, not when the sheet says four. Under six is a fundraising problem and a spending problem at the same time, and only one of them is fully in your control.
A few habits make the number more useful: keep at least three months of expenses in a separate account you don't touch, decide in advance what you'd cut first, and note that cutting costs rarely changes runway as fast as collecting a late invoice or delaying one big payment by two weeks.
This is general guidance for founders, not accounting or tax advice. Your tax position, liabilities, and payment obligations depend on details only your accountant can see, so have them sanity-check your assumptions once a quarter, especially around payroll taxes and deferred revenue.
Runway is not a measure of how good your business is. It's a measure of how much time you have to make it better. Knowing the number won't solve your problems, but it stops you from discovering them by accident.
Photo: KATRIN BOLOVTSOVA / Pexels
