Runway

Definition

Runway is the length of time a business can keep operating before it runs out of cash, assuming income and spending stay roughly as they are. You calculate it by dividing the cash you hold by your monthly net burn rate — the amount the bank balance falls each month once money in and money out are netted off. Six months of runway means six months until the tank is empty.

Why it is the survival metric

Profit and turnover describe how a business is doing; runway describes whether it will still be here. A company can be growing and still run out of road if it spends faster than cash arrives. Watching runway forces the question early — extend it by lifting income, trimming burn, getting paid faster, or arranging finance — rather than discovering the problem when the account hits zero. A short, shrinking runway is the clearest signal that something has to change now.

Extending it

You lengthen runway by adding cash or slowing burn. Speeding up collections shortens your cash conversion cycle and frees money already earned; a flexible facility adds a buffer for the dip without committing you to a lump sum you do not yet need. A live cash-flow forecast turns runway from a guess into a date on the calendar, and a working-capital facility can bridge a gap the forecast reveals.