Cash Runway
Cash runway is the number of months your business can continue operating before running out of cash, based on your current burn rate. It is calculated by dividing your current cash balance by your net burn rate.
Types
Current Runway
Cash on hand divided by net monthly burn. If you have $120,000 and burn $20,000/month net, you have 6 months of runway.
Projected Runway
Runway adjusted for expected revenue growth or expense changes. More useful for planning than the static calculation.
Why it matters
Runway tells you how much time you have to make decisions. It is the single most important number for a business that is not yet profitable, and still critical for profitable businesses facing seasonal cash flow gaps.
Real-world example
A field service contractor has $80,000 in the bank. After paying labor, fuel, materials, and overhead, they net burn $16,000 per month. Their runway is 5 months. That means they need to grow revenue, cut costs, or secure a line of credit within 5 months.
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