How to Calculate Cash Flow Runway
Most small businesses operate with under three months of cash reserve. Knowing your exact runway — not just a vague sense of it — turns a looming problem into a plannable one.
Runway (months) = cash on hand ÷ net burn, where net burn = monthly expenses − monthly revenue. If revenue covers expenses, runway is effectively infinite.
Net burn, not just expenses
Runway isn't just cash ÷ total expenses — it's cash ÷ net burn (expenses minus revenue). A business with high expenses but strong revenue may have far more runway than the raw expense number suggests, and vice versa.
Worked example
$30,000 cash on hand, $10,000 monthly expenses, $4,000 monthly revenue: net burn = $6,000/month. Runway = 30,000 ÷ 6,000 = 5 months — a concrete deadline to either raise revenue, cut costs, or secure funding.
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Frequently Asked Questions
What counts as 'cash on hand'?↓
Money immediately available to cover expenses — checking/savings balances and near-cash equivalents. Don't include unpaid invoices or illiquid assets.
How often should I recalculate runway?↓
Monthly at minimum, or whenever a significant expense or revenue change occurs — runway shifts quickly as either side of the equation moves.