Cash Runway
Number of months the business can continue operating at current burn rate with existing cash reserves
What is Cash Runway?
Cash runway is the number of months a business can keep operating before it runs out of cash, at its current rate of spending. It is especially important for start-ups and other businesses that spend more than they earn.
It tells leaders how much time they have to reach profitability or raise more funds.
How this KPI is measured
- Function
- Finance
- Sub-function
- Cash Flow Management
- Industry
- All Industries
- Type
- Leading
- Impact
- Risk
- Unit
- months
- Measurement frequency
- Monthly
- Formula
- Current cash balance / Average monthly net cash burn
How to calculate it
Divide the current cash balance by average monthly net cash burn.
For example, with 2,400,000 in cash and average net burn of 200,000 a month, runway is 12 months.
Use net burn, meaning cash out minus cash in, and use a recent average. Update it whenever the plan or spending changes.
Where it is used
Planning fundraising
Know when to raise money.
Making spending decisions
See the effect of costs.
Reporting to investors and boards
Show financial health.
How to improve it
Tips and common mistakes
- Fundraising usually takes longer than planned.
- Plan with a safety margin.
- Model different scenarios.
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