Unit Economics
Runway
Runway is the number of months a company can keep operating before it runs out of cash, assuming current burn and revenue hold.
Also known as: runway, cash runway
Why it matters
Runway is the countdown clock every founder runs against. It frames every decision: how fast to hire, how big to bet, when to raise. Short runway plus flat growth is the most common way startups die. The honest question is not just how many months you have, but whether your growth will outrun your burn before the clock hits zero.
Formula
Runway (months) = current cash / net monthly burn. If you are profitable (revenue exceeds expenses), runway is effectively unlimited at current rates.
Worked example
$120,000 in the bank and $12,000 net burn per month gives 10 months of runway.
Common mistakes
- Calculating runway off gross burn when you have real revenue, which understates it.
- Assuming burn stays flat while you are actively hiring.
- Ignoring that a single slow sales month can shorten runway fast.
Frequently asked questions
How do you calculate runway?
Divide current cash by net monthly burn. With $120,000 and a $12,000 monthly burn, you have 10 months. If you are profitable, runway is effectively unlimited at current rates.
What is a good amount of runway?
A common rule of thumb is 18 to 24 months after a raise, enough to hit meaningful milestones before needing more money. For bootstrappers, the goal is reaching profitability before zero. More is safer, within reason.
What happens when you run out of runway?
Without new revenue or funding, the company cannot pay its bills and must shut down, sell, or do an emergency raise on bad terms. That is why founders watch runway constantly. Running out quietly is the most common startup death.
How do you extend runway?
Cut burn, grow revenue, or raise capital. The fastest lever you control is usually reducing spend. Raising prices and improving retention also help without needing outside money.
When should you raise money before runway runs out?
Well before zero. Fundraising takes months, and raising from desperation gets worse terms. The rule of thumb is to start raising with at least six months of runway left.
Does revenue count toward runway?
Yes. Runway is based on net burn, which subtracts revenue from expenses. Growing revenue extends runway even if you raise nothing. Calculating off gross burn understates how long you really have.
Related terms
More in Unit Economics
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Last updated 2026-06-02 · Back to the glossary