Cash runway explained for company directors

2 min read

Balance ÷ burnMonths of cash left

The deadlineWhen cash hits zero

Extend itCut burn or raise cash

Number of lean months per year

Average monthly shortfall in lean months (£)

Unavoidable monthly fixed costs (£)

Sizes the working-capital buffer a seasonal business needs to cover its lean period.

What runway is

Runway is simply your available cash divided by your monthly net cash outflow — your burn rate. If you hold £90,000 and burn £15,000 a month, you have six months of runway. It is most talked about among loss-making startups, but every business has a runway; for a profitable one it is effectively infinite, and for one in a rough patch it is the number that matters most.

How to calculate it honestly

Take your current usable cash — bank balance plus committed facilities you can actually draw, minus any money already spoken for. Divide by your average monthly net burn over the last three months, not your best month. The honest version uses your worst realistic assumptions: slower receipts, no new sales, tax bills landing on time. A flattered runway is worse than useless.

What a short runway tells you

Under about three months, runway is a klaxon: you need to act now, because your options shrink as the number falls. Under six, it is a firm prompt to plan. The key insight is that action gets harder the longer you wait — a lender or investor is far more comfortable with a business that comes to them at four months of runway than one at four weeks. See how to extend your runway.

Extending the runway

There are only three levers: spend less (cut burn), bring cash in sooner (chase debtors, take deposits), or add cash (finance or investment). Most turnarounds use all three. A short working-capital facility can buy the weeks you need to fix the underlying problem — provided the problem is timing, not a business that simply loses money.

Buying time deliberately

Used well, finance extends runway to let a viable business trade through a rough patch.

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Work out your figure with the cash runway calculator.

Frequently asked questions

How do I calculate cash runway?

Divide your usable cash by your average monthly net burn. £90,000 of cash burning £15,000 a month is six months of runway. Use a conservative burn figure and only count cash you can actually access.

What is a healthy runway?

There's no universal number, but under three months is a red alert and under six is a prompt to plan. The right buffer depends on how predictable your cash flow is and how fast you could raise more if needed.

How do I extend my runway?

Cut burn, accelerate receipts, or add cash through finance or investment. Most turnarounds do all three. Acting early matters — options narrow sharply as the runway shortens.