Startup runway is the estimated time before available cash is exhausted at an assumed rate of net cash consumption.
It turns a cash balance and spending forecast into a planning horizon, not a guaranteed survival date. Return to the business plan glossary for related terms.
Formula and calculation
Runway in months = Available unrestricted cash ÷ Monthly net cash burn
Use cash genuinely available for the forecast costs and a positive monthly net-burn assumption. Exclude restricted balances and uncommitted fundraising. If you plan to preserve a minimum cash reserve, subtract it before calculating the usable horizon and explain that this measures time to the reserve rather than to zero.
Worked example: illustrative figures
Illustrative example: Bright Queue is a fictional booking-software startup with $240,000 unrestricted cash. Illustrative monthly operating payments are $50,000 and customer collections are $20,000. It has no other cash movements in this constant-burn example. All figures use one consistent currency, USD or CAD.
| Item | Amount |
|---|---|
| Unrestricted cash | $240,000 |
| Monthly cash payments | $50,000 |
| Monthly customer receipts | $20,000 |
| Net monthly burn | $30,000 |
| Simplified runway | 8 months |
Net burn is $50,000 − $20,000 = $30,000. Runway is $240,000 ÷ $30,000 = eight months. If management preserves a $60,000 reserve, the time to that reserve is ($240,000 − $60,000) ÷ $30,000 = six months. If burn rises to $40,000, time to zero falls to six months and time to the reserve falls to 4.5 months.
How to interpret the result
A flat monthly calculation ignores hiring steps, seasonality, equipment purchases and late customer payments. If net burn is zero or negative, this division does not produce a useful finite runway; build a cash forecast instead of interpreting a negative answer as negative survival time. A credit line is financing with terms and availability conditions, not unrestricted cash on hand.
Using this measure in a business plan
Show when the cash balance crosses a defined minimum, the milestone expected before that point and the actions available if sales slip. Include fundraising or financing only as explicitly labelled scenarios until committed. Update the monthly model when hiring dates, collections or spending change.
For help connecting assumptions to the financial statements, see our financial modelling services and business plan writing services.
Related glossary entries
Frequently asked questions
Does runway include future fundraising?
The simple cash-on-hand calculation does not include uncommitted fundraising. Show possible funding separately with its timing, conditions and downside case.
What if the startup is cash-flow positive?
A positive-burn division no longer gives a useful finite horizon. Forecast monthly balances to identify future investment needs and seasonal shortfalls.
How much runway should a startup have?
There is no universal number. Consider milestones, funding lead times, fixed commitments and downside scenarios, then explain the cash buffer chosen.