Cash Runway
Definition
How many months your business can keep operating with the cash it has, at its current rate of net cash outflow.
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Formula
Cash Runway (months) = Current Cash ÷ Average Monthly Net Cash BurnRunway turns your bank balance into time. It tells you how long you have to fix margins, raise money or cut costs before cash runs out, which makes it one of the most important numbers for a business that is not yet cash-positive.
For seasonal businesses, use a forecast rather than a simple average, because burn can be much heavier in the months you are buying for peak. Watch for: runway under six months without a clear plan to extend it.
Example
$90,000 in the bank and an average net burn of $15,000 a month gives 6 months of runway.