How to calculate your real runway

Ask an owner how much runway they have and you'll usually get a number within a second or two. Ask how they got it and the confidence drops immediately.

The number nearly always comes from the same calculation:

Cash in the bank ÷ average monthly burn = months of runway

It is easy, it is fast, and it is wrong often enough to be dangerous — because it treats cash as a smooth line when your business does not spend money smoothly.

Three things the simple version misses

1. Money you have already spent

The bank balance is not your cash. Your cash is the balance minus everything you have already committed to — signed contracts, accrued payroll, the annual insurance renewal, the tax payment due in eleven weeks, the last two invoices from the agency that haven't cleared yet.

A business with $400,000 in the bank and $160,000 of committed spend over the next quarter does not have $400,000. It has $240,000 of discretion, and that is the number every decision should be measured against.

2. Timing

Average burn hides the shape. Most businesses have a worst week — the one where payroll, rent, a quarterly tax payment and a large supplier all land together. If that week sits below zero, it does not matter that the annual average looks comfortable. You are still short on the day.

This is the single most common reason a business with "eight months of runway" has a cash emergency in month three.

3. Receivables that don't behave

Forecasts almost always assume customers pay on terms. Look at what actually happened over the last twelve months instead. If your stated terms are net 30 and your real DSO is 52 days, then three weeks of every month's revenue arrives later than your model thinks.

A better calculation

You want the lowest cash point over the next thirteen weeks, not a monthly average. The mechanics:

1. Start with today's actual bank balance, not the month-end figure.
2. Lay in every committed outflow by the week it will actually clear — payroll, rent, debt service, tax, known supplier payments.
3. Lay in expected collections by week, timed to your real DSO rather than your stated terms.
4. Find the lowest weekly balance. That is your true position.

Thirteen weeks is not arbitrary. It's long enough to catch a quarterly obligation and short enough that the assumptions are still credible. Beyond a quarter you are forecasting; inside it you are mostly counting.

What to do with the answer

Runway is only useful if it changes a decision. Two practical rules:

• Set a floor, not a target. Decide the balance you will not go below — commonly six to eight weeks of operating cost — and treat any decision that breaches it as automatically no.
• Watch the trough, not the average. If your lowest week is trending down month over month while your average holds steady, something is deteriorating that the average is hiding.

Run it on your numbers

The runway calculator gives you a fast version — cash, burn, and a growth assumption. No email required.

The full weekly version is the first thing we build in a Cash Clarity Sprint, because almost every other question an owner has depends on it. You cannot sensibly decide about a hire, a price change, or a piece of equipment until you know what the next thirteen weeks actually look like.