Definition
Runway is the number of months a company can continue operating before it runs out of cash, assuming current spending and revenue patterns continue unchanged.
Formula: Runway = Cash on Hand ÷ Net Burn Rate
Why It Matters
Runway is the clock that governs every strategic decision in a growing business. It determines when you need to raise funds, when you can afford to hire, and when you need to cut costs. Running out of runway means running out of business.
Most founders check runway quarterly — which is far too infrequent. Burn rate changes weekly based on new expenses, timing of receivables, and seasonal patterns. A founder who checks runway quarterly might discover a 3-month gap that developed over 6 weeks of gradual burn increase.
How to Extend It
- Reduce burn: Cut unnecessary expenses, renegotiate vendor contracts, eliminate duplicate subscriptions.
- Accelerate revenue: Shorten payment terms, offer early payment discounts, improve collections.
- Raise capital: If organic measures aren't enough, extend runway through debt or equity financing.
Example
A startup has $450K in the bank. Monthly revenue is $30K and monthly expenses are $80K, giving a net burn rate of $50K/month. Runway = $450K / $50K = 9 months. If the founder wants to hire two engineers at $12K/month each, burn jumps to $74K and runway drops to about 6 months. That single hiring decision cut three months off the clock — the kind of trade-off runway math makes visible.
What Good Looks Like
- 18+ months: Comfortable. You have time to experiment, iterate, and absorb setbacks.
- 12–18 months: Healthy but deliberate. Every major spend decision should be weighed against the runway impact.
- 6–12 months: Start fundraising or cutting. Fundraising typically takes 3–6 months, so waiting until you have 6 months left means you're already behind.
- Under 6 months: Emergency territory. Drastic cost cuts, bridge financing, or revenue acceleration are needed immediately.
The biggest mistake founders make is calculating runway once and forgetting about it. Burn rate is not static — it changes every week as new expenses hit, invoices get paid, and revenue fluctuates. Runway should be a live number, not a quarterly check-in.
How CentSight Helps
CentSight calculates your runway in real time and updates it daily as your financial position changes. It also runs scenario models: “What would our runway be if we cut $10K/month?” or “How would hiring two engineers affect runway?” — giving you answers in seconds, not hours.