Cash Runway
Formula
Cash Balance ÷ Monthly Net Burn
Definition
Cash Runway measures how long a company can continue operating before exhausting its available cash at its current burn rate. It is calculated by dividing the current cash balance by monthly net burn.
Runway is a point-in-time estimate rather than a forecast. Changes in revenue, expenses, working capital, or financing can materially extend or shorten the actual time before cash is exhausted.
Interpretation
Longer runway gives a company more time to reach profitability, achieve operating milestones, or raise additional capital. Shorter runway increases the urgency to reduce burn, improve cash generation, or secure additional financing.
The appropriate amount of runway depends on the company's stage, financing environment, and ability to adjust spending. Runway should be evaluated within this context.
Benchmark
- Less than 12 months
- Fundraising or cuts usually need to be underway already
- 12 to 18 months
- Increased need to plan for financing or lower burn
- 18 months or more
- Common operating range
These are general reference points rather than fixed targets. The appropriate runway depends on operating flexibility and fundraising conditions.
In MetricFrame
MetricFrame calculates Cash Runway using both EBITDA loss and operating cash flow as measures of burn, providing an operating view and a cash-flow view of remaining runway. Each measure is converted to a monthly burn rate and compared with the current cash balance.