What is the formula to determine cash runway from my current balance?

✓ Accepted answer

The formula to determine cash runway is your current cash balance divided by your monthly net burn rate.

• Step 1: Calculate Net Burn Rate. Determine your total monthly operating expenses and subtract your monthly revenue. If you have no revenue, your net burn equals your total expenses. For example, if you spend $120,000 and earn $70,000, your net burn is $50,000 per month.
• Step 2: Identify Current Balance. Use your current bank balance plus any liquid short-term investments that you can access immediately for operations. Exclude long-term assets like property or equipment that cannot be converted to cash quickly.
• Step 3: Apply the Formula. Divide the current balance by the net burn rate. Using the example above: $500,000 current balance / $50,000 monthly burn = 10 months of runway.
• Step 4: Adjust for Growth or Changes. If you plan to hire or increase marketing spend, recalculate with the new, higher burn rate. This provides a more realistic "worst-case" survival time.
• Step 5: Monitor Monthly. Recalculate this metric at the end of each month to track if your actual burn matches your forecast. Deviations indicate budgeting issues that need immediate attention.

Warning: If your calculated runway drops below three months, this is a critical financial distress signal. You must immediately contact your bank, investors, or a financial advisor to secure emergency funding or restructure expenses to prevent insolvency.

admin · 2026-10-24 22:01:21