Runway
How many months the business can keep operating before usable cash runs out at its current rate of spending more than it earns.
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What it is
Runway is the number of months a business can keep operating before its available cash reaches zero at the current net burn rate. If you have 120,000 in usable cash and lose 20,000 per month, the simple runway is six months. A profitable month has no net burn, so the simple division stops being the useful model.
Use runway for decisions with lead time: hiring, cutting costs, raising money, or deciding how aggressively to sell. Paul Graham's 2015 essay 'Default Alive or Default Dead?' reframes the same arithmetic as one question worth asking every month: on current growth and spending, do you reach profitability before the cash runs out, or not? Founders avoid the calculation precisely when the answer matters most. Recalculate it from actual cash movements each month and pair the headline number with a rolling cash forecast that includes tax, annual renewals, debt payments, and invoices that may arrive late.
Gotcha: cash in the bank is not all available cash. Payroll tax, sales tax, client deposits owed back if work is cancelled, and restricted funds may already have jobs. A six-month average burn can also hide a recent cost jump, so show both the trailing average and the latest month.
Ask AI for it
Build a 12-month runway model in Google Sheets from the cash balance, monthly revenue, operating costs, taxes held, debt payments, annual renewals, and receivables below. Separate usable cash from restricted cash. Calculate net burn, three-month trailing average burn, and runway as usable cash divided by average net burn, but return 'not burning cash' when the denominator is zero or negative. Add a 13-week cash-flow forecast, base, best, and worst cases, and the exact month each case crosses zero. State the three assumptions that move the date most.