How to calculate startup runway correctly
Runway is the clock every startup decision runs on. Getting it right means using net burn, a trailing average, and a live cash balance - not a single good month.
The runway formula
Runway
Runway (months) = Current cash / Average monthly net burn
Net burn is cash out minus cash in. Using net burn, not gross, and averaging over three months rather than one keeps a single lumpy month from distorting the number.
Gross burn versus net burn
| Metric | Definition | Use it for |
|---|---|---|
| Gross burn | Total cash spent per month | Understanding your cost base |
| Net burn | Cash spent minus cash collected | Calculating runway |
Runway is always built on net burn, because revenue extends the runway. A company with $200,000 of monthly spend but $80,000 of collections is burning $120,000 net, and that is the number the runway clock uses.
Common runway mistakes
- Using a single month of burn, which is easily distorted by a large one-time payment.
- Forgetting upcoming step-changes - a new hire class or an annual renewal - that raise burn.
- Counting restricted or committed cash as available runway.
- Ignoring the timing of a tax payment or debt repayment that lands inside the window.
- Assuming collections stay flat when a large customer is about to churn.
How Fintra keeps runway honest
- The cash runway dashboard reads the live bank balance and trailing net burn straight from the ledger.
- Scheduled bills, payroll, and expected collections flow in, so upcoming step-changes are already reflected.
- Scenario planning shows how a new hire plan or a slower raise changes the runway before you commit.
- Because burn is computed from the same GL you close, the runway number matches your books.
Frequently asked questions
How do you calculate runway?
Divide current cash by average monthly net burn. Net burn is cash spent minus cash collected, and averaging over about three months keeps a single unusual month from skewing the result. The answer is how many months you can operate before cash runs out at the current pace.
What is the difference between gross and net burn?
Gross burn is total cash spent each month. Net burn subtracts cash collected, so it reflects the real rate your bank balance is falling. Runway is always calculated on net burn, because revenue offsets spending and extends how long your cash lasts.
How many months of runway should a startup have?
A common target is 18 to 24 months after a raise, which gives time to hit milestones before fundraising again. Below about 6 months, most teams should already be either raising or cutting burn. The right number depends on how long your next fundraise realistically takes.
Should I use one month or an average for burn?
Use a trailing average, typically three months. A single month can be distorted by a large one-time payment, an annual renewal, or a lumpy collection. Averaging smooths that out, and pairing it with a forecast catches known step-changes that a backward-looking average would miss.
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