How much runway do you have? (and how to count it right)

Ask a founder how their business is doing and you'll get a story. Ask how many months of runway they have and you'll usually get a pause — then a guess. It's the single most important number about a business that isn't yet self-funding, and it's the one most people can't say out loud without checking.

The good news: it's a two-input calculation. The catch: nearly every common way of doing it tilts the answer in your favor — so the number you carry around is often a month or two sunnier than the bank account agrees with. Here's how to count it the way a CFO would.

What runway really is

Runway is how long your cash lasts at the rate you're spending it. Two numbers, one division:

Runway (months) = cash on hand ÷ net monthly burn

That's it. If you've got $180,000 in the bank and you're burning $30,000 a month, you have six months. The arithmetic was never the hard part — getting the two inputs honest is.

Burn is cash out minus cash in — not your loss

The mistake that trips up almost everyone: reading burn off the bottom of the P&L. Your net loss and your cash burn are cousins, not twins. Depreciation sits in the loss but takes no cash; a chunk of payroll might be owed but not yet paid; a customer's deposit lands in the bank but never touches the income statement. Burn is a bank-account number, not an accounting one.

It also comes in two flavors, and mixing them up is its own trap:

• Gross burn is everything going out the door each month — the full cost of keeping the lights on.
• Net burn is gross burn minus the cash coming in from customers. This is the one that sets your runway, because revenue is genuinely buying you time.

Use net burn for the runway clock. But keep an eye on gross burn too — if all your revenue vanished tomorrow, gross burn is the rate the tank drains at, and it tells you how exposed you are to one bad quarter.

The four ways the number flatters you

A runway figure is only as honest as the burn behind it. These are the four leaks that quietly add phantom months — every one of them rounds in the comfortable direction:

• Counting profit instead of cash. Accrual accounting can show a smaller loss than the cash you actually spent. The bank doesn't do accruals.
• Averaging a lucky month.Pick a month where a big invoice happened to land and your "typical" burn looks tame. Use a trailing three-month average, not your best one.
• Treating a one-time inflow as normal.A tax refund, a deposit, a one-off project: great for the balance, but it's not recurring. Strip it out before you divide.
• Forgetting burn grows.You're hiring, raising salaries, signing bigger contracts. The hire you make in month two shortens the runway you counted in month one. A flat burn assumption is an optimistic one.

Average burn hides the month it actually bites

Even an honest average can lull you. "Six months" sounds like a smooth glide to zero — but burn is lumpy. Quarterly tax, an annual insurance premium, a payroll month with three pay runs: any of them can pull your real low point weeks earlier than the average implies.

Runway tells you how long; it can't tell you which week it gets tight. For that you want the forward view — the 13-week cash flow — which walks the balance week by week and flags the low point before it arrives. Runway is the altitude; the 13-week is the terrain map.

How to buy more runway

Once the number is honest, it stops being a worry and becomes a set of levers. Each one moves it in a different way:

• Pull cash in faster.Tighten payment terms, invoice the day the work ships, chase what's overdue. Every dollar collected sooner is runway you already earned but hadn't banked.
• Push non-urgent cash out. Negotiate terms with suppliers, move an annual payment to monthly, delay the spend that isn't load-bearing this quarter.
• Cut burn where it doesn't cost growth. A dollar off recurring cost extends runway every single month — far more leverage than a one-time saving.
• Line up credit before you need it. A facility you arrange in month one, from strength, is cheaper and bigger than one you beg for in the month you're short.

The founders who sleep well aren't the ones with the most cash — they're the ones who know their number to the month, recheck it when burn changes, and never get surprised by it. (If you're weighing whether it's time to hand this to someone, that's its own question — here's an honest answer.)