Runway months from cash balance, expenses, and revenue

Gross Burn Versus Net Burn Is the First Distinction

Gross burn is total monthly expenses — rent, salaries, software, hosting, everything the company spends. Net burn subtracts monthly revenue from gross burn. A startup spending 100,000 a month with 30,000 in monthly revenue has 100k gross burn and 70k net burn. Investors and boards track net burn because it measures how fast the bank account actually empties. Gross burn matters when planning hiring, cost-cutting, or scenario modeling where revenue is not guaranteed to continue.

Runway Math

Runway equals cash balance divided by net burn. 1,000,000 in the bank with 70,000/month net burn gives 14.3 months of runway. Divide by net burn, not gross burn, because revenue is offsetting some costs. If revenue exceeds expenses, net burn is zero and runway is infinite — you are profitable, and the calculator reports that. If revenue drops to zero unexpectedly, gross burn becomes the relevant number. Model both scenarios because revenue in early-stage startups is rarely reliable.

The 12-Month Rule

Standard startup advice says to raise capital when you have less than 12 months of runway. This is because fundraising typically takes 3-6 months from first conversation to wired funds. Starting at 12 months gives roughly 6 months of active fundraising plus a buffer. Starting at 6 months means fundraising becomes distress fundraising, where valuations compress and terms worsen. The calculator's isPositive indicator flips when runway drops below 12 months as a quick visual check on fundraising urgency.

What Counts Toward Monthly Expenses

Salaries and contractor payments are almost always the largest line item for software startups (60-80% of monthly burn). Office rent, insurance, software subscriptions, hosting, ad spend, professional services. Payroll taxes, healthcare, equipment leases, travel. A common mistake is forgetting quarterly or annual expenses — legal retainer, software annual renewals, business insurance. Convert these to their monthly equivalents before entering. A 12,000 annual contract is 1,000/month of monthly burn even though it only hits the bank account once.

Worked Example

Seed-stage SaaS startup. Cash balance: 800,000. Monthly expenses: 95,000 (team of 7 at 80k avg plus overhead). Monthly revenue: 18,000 (early MRR). Gross burn: 95,000. Net burn: 77,000. Runway: 800,000 / 77,000 = 10.4 months. Additional revenue needed to break even: 77,000/month — roughly 4x current MRR. Revenue coverage: 19%. Read: runway is below 12 months, so active fundraising should start now. To break even organically, MRR needs to 5x — possible if growth is strong but risky to bet on versus raising.

Runway Extension Levers

Reduce expenses. Typical cuts: postpone hires, renegotiate vendor contracts, cancel unused software, move to cheaper office or remote-first. Realistic: 10-20% expense reduction without damaging operations. Increase revenue. Price increases, upsells to existing customers, faster new-customer acquisition. Realistic: 20-50% revenue growth over 3-6 months if product-market fit is there. Raise capital. Most common runway extension. Realistic: 6+ months of capital typically adds 12-18 months of runway net of fundraising costs and dilution. Bridge financing. Short-term debt or convertible notes. Useful when a round is imminent but not closed. Usually 3-6 months of extension.