Runway is the number of months your business can keep going before it runs out of cash. You work it out by dividing your cash balance by your average monthly net burn. It's the number founders use to decide when to hire, when to raise, and when to cut.
Runway is the most important number for any business that isn't yet profitable. It takes your cash position, your spending, and your time to the next decision, and rolls them into one figure everyone on the team can act on. When runway gets short, every other decision (a new hire, a marketing test, a legal spend) becomes a runway question first.
For founders, runway is the clock that drives fundraising. Most investors expect at least 6 months of runway when they meet you, because closing a round takes 3 to 6 months and they don't want to be your last hope. Walk into a pitch with 3 months of runway and you've handed the leverage to the other side. Walk in with 12 and you're choosing between offers.
For finance teams and accountants, runway is the headline on every monthly financial pack. Boards read it first, before revenue or margin, because it answers the only existential question: how long do we have? A good finance function doesn't just report runway - it runs what-ifs. What happens if revenue stalls for two months? If the next fundraise slips a quarter? Those scenarios are the difference between a calm planning conversation and a panic one.
Runway is a simple formula with a lot of nuance hiding inside it.
The formula:
Real example:
A SaaS startup has £480,000 in cash. Over the last 3 months they spent £80,000, £95,000, and £75,000. They earned £30,000, £35,000, and £40,000. Net burn averages £48,333 per month. But one of those months included a £12,000 legal fee - a one-off. Strip it out and average burn drops to £44,333. Runway = £480,000 / £44,333 = 10.8 months. Round down: 10 months.
Common variation - default alive runway:
The standard formula assumes burn stays constant. Default alive runway projects your revenue growth against your burn and asks: do they cross before the cash runs out? If revenue is growing 15% month-on-month and burn is flat, your effective runway is longer than the static number suggests. If revenue is flat and burn is growing 5% a month, it's shorter. Better dashboards calculate both - a static runway figure and a forward-projected one based on trend.
Common mistakes:
Best practices:
Aarvo calculates your runway in real time on the dashboard. As transactions land via your connected bank feeds, your cash balance updates automatically, and your rolling burn average recalculates. No month-end spreadsheet exercise to know where you stand.
The dashboard separates one-off spend from baseline burn, so the runway figure reflects sustainable spending and not a single noisy month. If a £10,000 legal fee lands in March, Aarvo flags it as non-recurring and gives you the option to exclude it from the average.
You can also set a runway threshold (say 9 months) and Aarvo alerts you when you cross it, so you're never surprised. Sign up free and your runway is live on the dashboard within minutes of connecting your bank.
Runway is how many months your business can survive at its current spending rate before the bank account hits zero. If you have £120,000 in cash and you spend £20,000 more than you earn each month, your runway is 6 months. It's the single number founders use to decide when to raise money, when to hire, and when to cut costs.
Divide your current cash by your average monthly net burn (what you spend minus what you earn). Use a 3-month average, not last month alone, so one-off costs don't throw off the number. Most founders track this in a spreadsheet, but it gets messy fast once you factor in bank feeds, annual renewals, and late invoices.
Burn rate is how much cash you lose per month. Runway is how long that cash will last. Burn rate is the speed; runway is the distance. They're directly linked: if you cut burn in half, runway doubles. Most founders track both, but runway is the headline number on the board deck because it's what investors and the team actually feel.
Default alive is a Paul Graham idea: a startup is default alive if, on its current growth and burn, it will become profitable before the cash runs out. Default dead means it won't - so it needs to raise money or change course. Work it out by projecting your revenue growth against your burn over your remaining months. If revenue catches up to burn before month zero, you're default alive.
Most early-stage startups target 18 to 24 months of runway after a fundraise. That gives 12 to 18 months to hit milestones, then 6 months to raise the next round. Below 12 months, you're in fundraising mode whether you want to be or not. Below 6 months, your leverage in any negotiation drops fast. Bootstrap businesses often target a permanent 6 to 12 month cash buffer instead of a runway target.
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