What runway means
Cash runway is how many months your business can keep operating with the cash it has, if things carry on as they are. It is most often used by businesses that spend more than they bring in, but it is useful for any business as a stress test: if income stopped growing, or dropped, how long would you have?
The calculation
Runway in months = cash in the bank ÷ net monthly burn.
Net monthly burn is your monthly money out minus your monthly money in, when that is positive. If you bring in more than you spend, you are not burning cash and runway is not the right measure.
| Today | If income falls 10% | |
|---|---|---|
| Cash in the bank | £90,000 | £90,000 |
| Money out each month | £45,000 | £45,000 |
| Money in each month | £30,000 | £27,000 |
| Net monthly burn | £15,000 | £18,000 |
| Runway | 6 months | 5 months |
A 10% fall in income cost a month of runway. That sensitivity is the useful part: it shows how exposed you are to a change you do not control.
Where the simple version falls short
The calculation treats every month as average. Real cash moves in lumps: VAT quarters, annual insurance, a large invoice that lands in month three. A week-by-week forecast finds the point where cash is tightest, which an average hides. Use the simple version for a quick read and a 13-week forecast for decisions.
If the answer is shorter than you would like
- Collect faster: chase overdue invoices and invoice earlier. See how to chase late-paying clients.
- Delay or stage discretionary spending until cash is stronger.
- Test the effect of each change before committing, for example in a hire scenario.
- Talk to your bank or accountant about funding before you need it, not after.
You can work out your own figure with the free cash runway calculator.
General information, not financial advice.