Burn rate measures how quickly a startup uses cash. Founders typically need two views: gross burn, which is total monthly cash operating spend, and net burn, which subtracts operating cash inflows.
Estimated runway = available cash ÷ net monthly burn.
Start with cash, not accounting labels
A profit and loss statement is essential, but runway depends on timing. Annual software payments, delayed customer collections, debt payments, tax deposits, and capital purchases can make actual cash use different from the P&L average.
Use more than one month
Calculate burn for each recent month, then explain the changes. A three- or six-month average smooths noise, but it should not erase a real trend such as a hiring ramp or slowing collections.
Build three runway cases
- Base: current plan and realistic collections.
- Downside: slower revenue or an unexpected cost.
- Action: specific changes management can make now.
Review the forecast every month
Runway changes whenever the cash balance, hiring plan, revenue timing, or major commitments change. Treat it as a living operating metric.
Founder and CEO of WGF Group, helping startups build clear books, runway models, and investor-ready reporting.