How to use the burn rate and runway calculator
The Burn rate & runway tool answers how long the money lasts:
- Cash balance. What you could spend today: bank balances and money market funds, but not credit you have not drawn.
- Monthly revenue and expenses. Use cash figures from your bank statements rather than invoiced sales or accrued costs. Expenses should include everything that leaves the account: payroll and payroll taxes, rent, software, contractors, marketing and loan payments. An average of the last three months smooths out lumpy bills.
- Growth rates. Monthly growth for revenue and for expenses. Planned hires belong in the expense growth rate; a sales plan belongs in the revenue rate. Enter 0 for both to get the plain, no-growth runway.
The Emergency reserve tool sizes a cash cushion for a business that is already profitable, or wants protection once it is. Enter your fixed monthly operating costs, the months of cover you want, what you hold now and what you can add each month.
The formulas
Net burn = Monthly expenses − Monthly revenue
Runway with no growth = Cash ÷ Net burnIf revenue is higher than expenses, net burn is negative: the business is adding cash, and runway is not limited by burn.
With growth, the calculator steps through the months:
Cashm = Cashm−1 − (Expensesm − Revenuem)
Runway = (k − 1) + Cashk−1 ÷ Net burnkR and E are this month's revenue and expenses, gr and ge their monthly growth rates, and k the month in which the cash runs out. The breakeven month is the first month in which revenue is at least as large as expenses.
The reserve tool uses simple arithmetic:
Months to fund = (Target − Current reserve) ÷ Monthly saving, rounded up
A worked example
A startup holds $750,000. It brings in $40,000 a month and spends $95,000, so gross burn is $95,000 and net burn $55,000.
With no growth, the cash would last 13.6 months. But revenue is growing 5% a month and expenses 1%, so net burn shrinks over time. The cash now lasts 18.7 months and runs out during month 19.
Revenue would overtake expenses in month 24, a few months too late. The balance would bottom out $35,830 below zero, so roughly that much extra cash, from a raise, a loan or cost cuts, would carry the company to breakeven.
With $900,000 in the bank instead, the same plan reaches breakeven in month 24 with the balance never falling below $114,170. The difference between those two outcomes is why founders watch the runway and the breakeven month together.
What changes the runway most
Small changes in the monthly growth rates compound into large differences in how long the money lasts:
| Assumption | Runway | Breakeven |
|---|---|---|
| No growth in revenue or expenses | 13.6 months | Not reached |
| Revenue +3% a month, expenses +1% | 14.3 months | Month 46 |
| Revenue +5% a month, expenses +1% (the example) | 18.7 months | Month 24 |
| Revenue +8% a month, expenses +1% | Cash does not run out | Month 14 |
| Revenue +5% a month, expenses +3% | 12.6 months | Month 46 |
The last row shows the cost of hiring ahead of revenue: if expenses grow 3% a month instead of 1%, the runway is shorter than in the no-growth case, because spending rises faster than the revenue it is meant to produce. The 8% row shows the opposite: if growth arrives, the company never runs out at all.
A useful habit is to run three cases: the plan, a cautious version with slower revenue growth, and a version with revenue flat. If the flat case leaves too little time to react, the plan depends on growth that has not happened yet.
When to raise, cut or build a reserve
Runway is a countdown, and the actions that extend it take time. Raising equity often takes several months from first meetings to money in the bank, so many founders aim to start fundraising with a comfortable runway left, commonly cited as six to nine months or more. Cost cuts also take time to show in the numbers, because notice periods, contracts and annual subscriptions keep costs running for a while.
The calculator flags runways under nine months for that reason. It is a rule of thumb rather than a hard line: a company with strong growth and interested investors can wait longer, while one in a difficult funding market may want to start earlier.
Once a business is profitable, the question changes from runway to resilience. An emergency reserve covers fixed costs through a bad quarter, the loss of a large customer or a client who pays months late:
| Cover | Reserve target | Time to reach it |
|---|---|---|
| 3 months | $90,000 | 3 months |
| 6 months (the example) | $180,000 | 1 year |
| 12 months | $360,000 | 2 years 6 months |
With $60,000 already set aside, the example covers 2.0 months of fixed costs today. Three to six months is the range most often suggested; businesses with seasonal sales or a concentrated customer base often choose the upper end or beyond. Holding the reserve in a separate account makes it less likely to be spent on day-to-day costs.
What this calculator does not include
- Timing within the month. Runway is fractional, but payroll and rent usually fall on fixed dates, so the real cash-out point can come a little earlier.
- Steady growth only. Revenue and expenses grow at constant monthly rates. Large one-off costs, new funding or a big contract are better modeled in the business cash flow forecast.
- Collections and payables. Revenue is treated as cash received. If customers pay on 30- or 60-day terms, use cash received, not sales.
- Taxes, interest on cash and credit lines. None are included.
- Dilution. Raising equity to extend runway gives up ownership; our equity dilution calculator shows how much.
- Interest on the reserve. The months to fund assume no interest, which slightly overstates the time needed.