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Advisory · 5 min read

Cash Runway Formula for Startups

Cash runway tells a startup how many months it can continue operating before it runs out of cash. This is one of the most important numbers for founders, especially before fundraising or hiring.

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The basic cash runway formula is:

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Cash runway = current cash balance ÷ monthly net burn

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If a startup has $300,000 in cash and burns $50,000 per month, the runway is 6 months.

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Cash runway helps founders decide when to raise funding, reduce expenses, increase revenue, or delay hiring.

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To calculate runway accurately, startups should track:

Cash balance
Monthly revenue
Monthly expenses
Payroll
Software costs
Contractor payments
Marketing spend
Debt payments
Expected large expenses

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Founders should review runway monthly. A startup with less than 6 to 9 months of runway may need to make decisions quickly.

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Runway is not just an accounting metric. It is a survival metric.

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