Calculating your runway without kidding yourself

You know the formula. Cash divided by monthly burn. It gives a number of months. That number ends up in a spreadsheet. The spreadsheet ends up in front of an investor.

The formula is fine. The two numbers you feed it are the problem.

Cash is not your bank balance

This morning's balance holds money that is no longer yours.

• The VAT you will remit next month.
• This month's payroll, if payday comes later.
• Annual subscriptions already signed. They leave in one go.
• A customer payment still promised, not yet received.

What matters is available cash. That is the balance, minus everything already owed. The gap between the two is often worth one to two months of runway. Two months is the difference between raising calmly and raising under pressure.

Average burn lies when there is no average

Averaging the last three months assumes those three months look alike. They rarely do. One hire, one campaign, one tax deadline. The average then describes a past that will not repeat.

The burn that matters isn't the one you had. It's the one your current commitments will produce next month.

Rebuild it from your commitments. Actual payroll, rent, tools, contracted providers. Add what is decided but not yet paid. A signed role starting in six weeks, for instance. That gives you your baseline burn. It is the only one that predicts anything.

One number is not enough

A single runway figure gives a false sense of precision. Three scenarios give a real one.

• As is: nothing changes. No hires, no new customers.
• Plan: you hire as planned. Revenue follows the forecast.
• Cautious: you hire as planned. Revenue reaches half the forecast.

The third one is the one you care about. It gives you a date. That is the date by which you must have decided something. You steer that date, not a number of months.

What it changes

A runway calculated this way is shorter than the one you had in mind. That is its value. The question is no longer "how long do we have". It becomes "what do we decide before this date".

An investor will run this calculation anyway, with their own assumptions. Better to arrive with yours. And to be able to defend it.

Romy runs this calculation on your numbers, and flags what changes when they move.