How to calculate startup runway
Runway is the number of months your startup can keep operating before cash runs out. This guide shows the formula, works a real example, and explains how revenue growth changes the answer.
MakeSense··3 min read
What is startup runway?
Startup runway is the time a company can continue operating before it runs out of cash. It answers one question every founder carries: how long do I have before I must raise, cut costs, or hit profitability?
Runway is usually expressed in months. A startup with 12 months of runway can operate for one more year at its current spending rate even if revenue never takes off.
The runway formula
With roughly flat spending, runway is simply:
Runway (months) = cash on hand ÷ monthly net burn
Where net burn is your monthly spending minus your monthly revenue. Spending Rs. 500,000 and earning Rs. 200,000 means a net burn of Rs. 300,000 - you consume that amount of cash each month.
If revenue grows, the calculation is no longer static: each month's shortfall shrinks, so runway stretches beyond the flat-burn estimate.
Worked example
- Cash on hand: Rs. 1,200,000
- Monthly revenue: Rs. 150,000
- Monthly costs: Rs. 400,000
- Net burn = 400,000 − 150,000 = Rs. 250,000
Flat-burn runway = 1,200,000 ÷ 250,000 = 4.8 months.
Now add 8% monthly revenue growth. Revenue grows from Rs. 150,000 by 8% every month, shrinking the shortfall each month, so the cash lasts past 7 months - a material difference for fundraising timing.
How much runway should you have?
12 to 18 months is the common target if you plan to raise venture funding, because fundraising itself typically takes three to six months of your full attention. Investors also prefer to back a company that is not negotiating from desperation.
A rough early benchmark: keep monthly burn between 5% and 10% of total funding so a new round is not needed within months of the last one.
Ways to extend runway
- Cut fixed costs - salaries, office, subscriptions. They act on every future month.
- Collect receivables faster - shorter payment terms and stronger follow-up convert paper sales into cash.
- Delay discretionary spend - travel, tools, hiring that is nice-to-have rather than must-have.
- Grow revenue without proportional spending - growth bought dollar-for-dollar leaves burn unchanged.
Step-by-step calculation
- Total the cash you can actually spend
Bank balances you can use for operations - not receivables you have not collected, and not cash reserved for payroll tax.
- Estimate average monthly revenue
Be conservative. A single paid invoice does not make a repeatable monthly revenue line.
- Estimate average monthly costs
Include founder salary, annual licences spread across months, and one-off equipment purchases you know are coming.
- Compute net burn
Monthly costs minus monthly revenue. Negative burn means you extend runway every single month.
- Divide cash by net burn
Months of runway. For example, Rs. 1.2 million divided by Rs. 250,000 gives about 4.8 months.
- Stress-test with growth
Repeat at your expected monthly revenue growth to see how much longer the cash lasts.
Frequently asked questions
What is the startup runway formula?
Runway (months) = cash on hand ÷ monthly net burn, where net burn is monthly costs minus monthly revenue. With growing revenue the shortfall shrinks each month and runway extends beyond the static figure.
How many months of runway should a startup have?
Most advice targets 12 to 18 months, especially before raising a round. Below three months, fundraising becomes extremely difficult because it takes three to six months to close a deal.
Should founder salary count in burn?
Yes. An unpaid founder makes runway look longer than it really is - the cost simply returns when the founder starts taking a salary.
What is a good startup burn rate?
Rather than an absolute number, most benchmarks look at burn relative to funding and runway. Keeping monthly burn around 5-10% of raised capital is common in early stages.
Does runway change if revenue is growing?
Yes. When revenue grows faster than costs, monthly net burn falls, so the same cash lasts longer. Model the growing case before assuming the flat-burn number is final.