How it's calculated
Runway is how long your cash lasts. Each month, cash falls by the net burn: what you spend minus the cash revenue you collect. With no growth, runway is simply cash ÷ net burn. When revenue or costs are growing, the burn changes every month, so the calculator steps through each month until the cash runs out, or for up to ten years.
It also answers Paul Graham's question of whether a startup is "default alive": assuming its expenses and its recent revenue growth continue, does it reach profitability on the money it has left?Paul Graham
The formula
- Net burn = monthly expenses − monthly revenue
- Simple runway (months) = cash ÷ net burn
- With growth: revenuem+1 = revenuem × (1 + revenue growth), expensesm+1 = expensesm × (1 + expense growth), and cashm = cashm−1 − (expensesm − revenuem). Runway ends in the month cash goes below zero (with the part month counted).
Worked example
With $1.2 million in the bank, $20,000 of monthly revenue and $120,000 of monthly costs, net burn is $100,000 and runway is 12.0 months.
| Line | Per month |
|---|---|
| Cash in the bank | $1,200,000 |
| Revenue | $20,000 |
| Expenses (gross burn) | -$120,000 |
| Net burn | $100,000 |
If revenue grows 15% a month while costs stay flat, revenue covers costs from Month 14, and the company is default alive: Yes. At 5% a month it is not: No, with runway of 12.9 months.
Assumptions and limitations
- Cash, not accounting profit. Use revenue you actually collect and costs you actually pay in each month; annual prepayments and deferred costs shift the timing.
- Steady growth rates. Real revenue grows unevenly, and hiring plans raise costs in steps; adjust the inputs for big planned changes.
- No new funding. Runway assumes no further money comes in.