Burn Rate and Runway Calculator
Burn Rate and Runway Calculator
How fast a business is spending its cash, and how many months the money in the bank lasts — at today’s figures, or with revenue and costs growing month by month.
Burn rate and runway
$50,00,000 in the bank, revenue $3,50,000 and expenses $8,00,000 a month, no growth
Burn and runway
With growth: cash after month m = cash + Σ [R(1 + gR)k−1 − E(1 + gE)k−1], k = 1 … m
- R, E
- revenue collected and expenses paid in month 1
- gR, gE
- monthly growth rates, compounding from month 2
- runway
- months until cash runs out; the first month that ends below zero is the whole number after it
Worked example
$50,00,000 in the bank, revenue $3,50,000 and expenses $8,00,000 a month, no growth
Net burn = 8,00,000 − 3,50,000 = $4,50,000 a month
Runway = 50,00,000 ÷ 4,50,000 = 11.1 months
Cash at the end of month 11: $50,000; month 12 ends below zero
With revenue growing 8% a month instead, revenue covers expenses in month 12 and cash never falls below $20,25,921
When the example runs out of cash, with growth
| Revenue growth | Expense growth | Cash below zero in month | Revenue covers expenses in month |
|---|---|---|---|
| 0% | 0% | 12 | Not within 99 months |
| 0% | 2% | 10 | Not within 99 months |
| 5% | 0% | Not within 99 months | 18 |
| 8% | 0% | Not within 99 months | 12 |
| 5% | 3% | 11 | 44 |
Gross burn, net burn and what runway really means
Burn rate is the speed at which a business uses up its cash. Gross burn is everything paid out in a month; net burn is that minus the revenue collected, and it is net burn that empties the bank. Runway is cash divided by net burn. In the example, $4,50,000 a month against $50,00,000 gives 11.1 months: the cash lasts through month 11 and month 12 ends below zero. Use cash actually received and paid, not revenue booked or bills not yet due, and count loan EMIs, which are cash going out even though only the interest is an expense in the accounts.
A flat runway is a floor for a growing business and a ceiling for one that is hiring. Enter monthly growth rates and the chart applies them month by month from month 2. Paul Graham’s test of whether a start-up is “default alive” asks exactly this: holding expenses where they are and assuming revenue keeps growing at its recent rate, does the company reach profitability on the money it has? In the example, 8% monthly revenue growth makes revenue cover expenses in month 12 before the cash is gone; 2% monthly growth in expenses alone brings the cash-out forward to month 10. The table shows other combinations.
The first month that ends below zero is not the day to start raising money. Fundraising and loans take months, so founders commonly plan to start well before the runway ends. Cash can also go negative and recover later if revenue grows fast enough; the chart shows that, but in practice the business would need money to survive the gap. Growth rates are assumptions, and small changes compound: test a cautious case alongside a hopeful one.
The page leaves out tax, one-off receipts and payments, and interest on the cash itself; add them to the monthly figures if they matter. For what each sale contributes, use the contribution margin calculator; for the economics of each customer, the LTV and CAC calculator. This is arithmetic on the figures you enter, not financial advice.
Frequently asked questions
How do you calculate burn rate?
Gross burn is total cash paid out in a month; net burn is gross burn minus cash revenue. 8,00,000 − 3,50,000 = $4,50,000 a month in the example.
How is runway calculated?
Cash divided by net burn: 50,00,000 ÷ 4,50,000 = 11.1 months. With growth in revenue or expenses, the chart finds the first month that ends below zero.
What does default alive mean?
Paul Graham’s term for a start-up that, with expenses held constant and revenue growing at its recent rate, reaches profitability before its cash runs out.
What if revenue is higher than expenses?
Then the business is not burning cash; the page shows a net burn of zero and the monthly surplus instead.
Related calculators
References
- Graham P. Default Alive or Default Dead? Essay, October 2015. https://paulgraham.com/aord.html: “Assuming their expenses remain constant and their revenue growth is what it has been over the last several months, do they make it to profitability on the money they have left?”
- Skok D. SaaS Metrics 2.0 — A Guide to Measuring and Improving What Matters. forEntrepreneurs.com, first published 4 July 2014, last modified 21 December 2020. LTV = ARPA × gross margin ÷ monthly churn; “Our guideline for a successful SaaS business is that [LTV ÷ CAC] should be higher than 3”; “Months to Recover CAC should be less than 12 months”, with longer paybacks now common in enterprise SaaS.