How to calculate (and extend) your startup's runway

What runway means

Runway is how many months your company can keep operating, at its current spending, before it runs out of cash. If you have $150,000 in the bank and lose $30,000 a month, you have five months of runway. It's the clock every other decision — hiring, spending, when to raise — runs against.

How to calculate it

The formula is simple: runway (months) = cash on hand ÷ net monthly burn. Take everything in the bank and divide by what you actually lose each month. You can do it on the back of an envelope, or use our free runway calculator, which also models revenue growth.

Gross burn vs net burn

Gross burn is everything you spend in a month. Net burn is that minus revenue. If you spend $40,000 and bring in $12,000, your gross burn is $40,000 but your net burn is $28,000 — and runway depends on net burn. As revenue grows, net burn shrinks, and your runway quietly gets longer.

What counts as a healthy runway?

A common rule of thumb: aim for 18–24 months of runway right after a raise, and try never to drop below six months. Six is the danger line because raising money itself usually takes three to six months — if you start when you're nearly out, you're negotiating from weakness.

Five ways to extend your runway

1. Cut or delay non-essential spend. Pause the tools, ads, and nice-to-haves that aren't pulling their weight yet.
2. Slow hiring. Payroll is usually the largest line; one deferred hire can add a month or more.
3. Collect what you're owed. Unpaid invoices are runway sitting in someone else's account — chase overdue ones and tighten payment terms.
4. Grow revenue. Even modest month-over-month growth compounds and can flip you cash-flow positive before the cash runs out.
5. Raise — but start early. Because it takes months, begin while you still have a comfortable cushion.

What to count as "cash on hand"

The numerator in your runway calculation matters. Cash on hand should include:

• All money currently in business bank accounts.
• Committed investment you've received (signed term sheet + funds transferred — not just verbal).
• Any credit lines you can draw on, if you're certain you will.

It should not include:

• Uncollected receivables — invoices you've issued but haven't been paid yet. These are real assets, but they're not in the bank. If a client is reliably on Net 15 and you have strong payment history, you might include them with a haircut. If they're slow payers, leave them out.
• Future revenue you expect to close. Hope isn't cash.
• Funds from a fundraise you haven't closed.

Being conservative with the numerator gives you a runway figure you can actually trust. The purpose of the number is to drive decisions, not to feel good.

The three runway zones — and what each demands

Not all runway lengths call for the same response. Here's a rough framework:

• 18+ months: You have time. Focus on growth. If you're going to raise again, start building investor relationships now — not because you need to, but because raising from a position of strength is dramatically easier than raising under pressure. Use this window to hit the milestones that will justify a strong valuation.
• 12–18 months: Start the raise. Fundraising usually takes 3–6 months once you're actively in it, and you want to close before you drop below 6 months. Simultaneously, look hard at burn: can you extend the runway by cutting or deferring anything material? Arriving at term sheet negotiations with 6 months of runway is a weaker position than arriving with 10.
• 6–12 months: Urgent. If you're raising, it needs to be the primary focus. If you're not raising, the calculus becomes: can you reach profitability or default alive before the cash runs out? Cut anything non-essential and revisit every line in your burn. This is not the moment for optimism — build a specific plan to either close a round or extend runway to sustainability.
• Under 6 months: Emergency mode. Raise immediately or cut to survive. The options narrow fast. This is also the zone where founders make expensive mistakes — taking bad terms, making hasty hires or cuts — because they're operating from fear. Having a clear number prevents surprises here; the real danger is not knowing you're in this zone until it's too late.

How to talk about runway with your team and investors

Investors will ask about runway in every conversation. The expected format is simple: "We have X months of runway at our current burn of $Y per month." Have the number ready and current. If they ask how you calculated it — cash balance, minus gross burn, adjusted for committed revenue — that's the right answer. Don't give a range unless you genuinely have uncertainty about a large expense; a range often reads as not knowing your numbers.

With your team, the decision is how transparent to be. Some founders share the runway number openly; others give a general sense ("we have plenty of runway to hit our next milestone"). There's no universal right answer, but leaning toward transparency — especially with senior team members — tends to build trust and align everyone on the urgency of hitting milestones. An unexpected company crisis is harder to navigate when it comes as a surprise to the people who needed to see it coming.

The mistake almost everyone makes

Calculating runway once and never again. It changes every time you hire, sign a customer, or a big invoice goes unpaid — so a number that was right last quarter is probably wrong today. A stale runway figure is worse than none, because it gives you false confidence. The fix is to make it live: that's exactly what Klerky does — it keeps your runway current from your real expenses, invoices, and salaries, so the number is always today's.