Cash runway basics for founders
Runway is how many months your business can operate at its current pace with the cash it has. It is one of the simplest numbers to calculate and one of the easiest to get wrong.
The calculation
Divide cash on hand by monthly net burn. Net burn is cash going out minus cash coming in. Gross burn is total cash out. Using gross burn gives a more conservative view if revenue is uncertain.
Keep it honest
Use an average of the last few months rather than one good month. Include annual or quarterly payments such as insurance and taxes. Exclude cash you cannot use freely.
Update and plan
Recalculate monthly from closed books. Founders often decide in advance what they would change at certain runway levels, such as when to start fundraising or cut costs.
What to check
- Cash you can actually use
- Average net burn over recent months
- Lumpy annual or quarterly payments
- Runway levels that trigger action
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Frequently asked questions
How much runway should a startup have?
It depends on the business and its funding plans. Many founders start fundraising well before cash gets low because raises take time.
Is this founder finance guide advice?
No. Sam's List writes these guides for education. They describe common questions and processes, not advice for your specific situation.
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