Burn Rate & Runway Calculator

What burn rate and runway mean

Burn rate is how fast a company spends its cash. It comes in two versions. Gross burn is everything that leaves the bank account in a month: payroll, rent, software, marketing, loan payments. Net burn is gross burn minus the cash that comes in from customers. Net burn is the number that decides how long you survive.

Runway is the number of months until the cash runs out if nothing changes. It is the most important number on a startup’s dashboard, because every other plan depends on still being in business.

The formulas

Net burn = Monthly expenses − Monthly revenue

Runway (months) = Cash in the bank ÷ Net burn

In its basic form, the calculation treats revenue and costs as fixed. Startups in practice seldom stay still, since revenue tends to climb while costs rise as you hire and spend on marketing. For this reason, the calculator also builds a month-by-month projection based on your growth rates. For every month, it adds revenue, deducts expenses and increases both by the percentages you supply, continuing until the balance falls below zero or five years have gone by.

Worked example

A software startup has $450,000 in the bank after a pre-seed round. It collects $18,000 a month from customers and spends $52,000.

• Gross burn: $52,000 a month.
• Net burn: $52,000 − $18,000 = $34,000 a month.
• Runway at today’s burn: $450,000 ÷ $34,000 = 13.2 months.

Now add growth. Revenue grows 8% a month and expenses 2% a month as the team adds tools and a part-time hire. The projection changes completely:

Revenue overtakes expenses in month 20, and the cash never runs out. But the lowest point is $8,324, about three days of expenses. If revenue grows 6% a month instead of 8%, the cash runs out in month 14 and revenue only catches up with expenses in month 29. Try it in the calculator: change revenue growth to 6% and watch the cash-out date appear.

That is the real use of a runway forecast. It does not predict the future. It shows how much room for error you have.

Default alive or default dead?

Paul Graham, co-founder of Y Combinator, put the question sharply in his essay Default Alive or Default Dead?: assuming your costs stay as they are and revenue keeps growing at its recent rate, will you reach profitability on the money you have left? If yes, you are default alive. If no, you depend on raising more money, and that is a much weaker position to negotiate from.

The calculator answers that question. When revenue covers expenses before the cash runs out, it says so. When it does not, it tells you roughly how much extra cash would carry you to break-even. That figure is a good starting point for the size of your next round or loan.

How much runway is enough?

• Under 6 months: urgent. Raising a round usually takes three to six months from first meeting to money in the bank, so you may already be late. Cut costs now.
• 6 to 12 months: start fundraising or make a plan to reach profit. Investors can sense a short runway, and it weakens your terms.
• 12 to 18 months: comfortable, but plan the next step. Many founders start raising again with 9 to 12 months left.
• 18 to 24 months or more: the common target after a funding round. It gives time to hit milestones that justify the next round, with a buffer for delays.

Ways to extend your runway

1. Collect cash sooner. Offer annual plans at a discount, ask for deposits, shorten payment terms from 60 to 30 days. Runway is about cash, not revenue booked.
2. Cut or delay the biggest costs. For most startups that is payroll. Delaying one hire by three months can add weeks of runway.
3. Review subscriptions and contracts. Small monthly tools add up. Downgrade or cancel what the team does not use every week.
4. Raise prices. A price increase lifts revenue with no extra cost, and it often loses fewer customers than feared. The break-even calculator shows how much a price change moves your margin.
5. Look at non-dilutive funding. Grants, revenue-based financing and government innovation programs can extend runway without selling equity.

Mistakes that make runway look longer than it is

• Counting revenue you have invoiced but not collected. Late payers shorten runway. Use cash received.
• Forgetting yearly and quarterly bills. Insurance, annual software licences, taxes and audit fees do not show up every month. Spread them across the months or model the month they hit.
• Leaving out planned hires. If the plan says you will hire two engineers in the spring, put their full cost, including employer taxes and benefits, into the expenses. The startup cost calculator shows the fully loaded cost of each role.
• Assuming growth continues forever. Monthly growth of 8% is strong for a young company, and it tends to slow. Test a lower rate to see your downside.
• Counting money that is promised but not signed. A term sheet is not cash in the bank.

From runway to a cash flow forecast

This calculator uses one growth rate for revenue and one for costs. A full cash flow forecast goes line by line: each salary from the month it starts, each marketing channel, each revenue stream, loans and investment rounds. It is the forecast investors ask to see, and the one you should update every month with actual numbers.

In Cuttles, you build that forecast in the budget. It calculates burn, runway and break-even for you, and the charts go straight into your business plan. You can start with the numbers from this page and try it free for 7 days.

The projection is a simple model based on the numbers you enter. It is not financial advice, and actual results will differ.