What Is Runway?
Runway is how many months your business can operate before running out of cash. Here's how to calculate and extend it.
Key Takeaways
- Runway = Cash Balance ÷ Monthly Net Burn Rate.
- It tells you how much time you have to reach profitability or raise more capital.
- Founders should always know their runway — and aim to keep it above 12 months.
The calculation
Runway is simple: divide your current cash balance by your monthly net burn rate. If you have £300,000 in the bank and you're burning £25,000 per month net, you have 12 months of runway. That's how long you have before you need to either reach cash-flow breakeven or secure additional funding.
Why runway thinking matters
Runway forces you to think in time, not money. 'We have £300,000' sounds like a lot. '12 months of runway with Q4 sales peak two months away' is a very different picture. It creates urgency and clarity around decisions.
The 18-month rule
Many experienced founders and investors use 18 months as a minimum comfortable runway. This is because raising capital typically takes three to six months, leaving a genuine buffer before you're in distress. If runway drops below 12 months, it is time to take action — reduce burn, accelerate revenue, or begin fundraising.
Extending runway
The same levers apply as for burn rate: reduce costs, accelerate revenue collection, improve gross margin. On the revenue side, annual payment options (discounting for upfront payment), deposits on orders, and faster invoicing all pull cash forward and extend runway without touching your cost base.