The months-of-survival number
Cash runway is how many months a company can operate before running out of cash, calculated as cash on hand divided by net burn, and it is the fundamental survival metric for an unprofitable company. A company with 3,000,000 in the bank burning 250,000 a month has roughly twelve months of runway. That single number frames every major decision: how aggressively to spend, when to raise, whether to hire or cut. For a company not yet profitable, runway is the clock everything else runs against.The two levers that extend it
Runway is a simple ratio, so only two things move it:
- Lower net burn: grow revenue or cut costs, stretching the same cash balance further. - Raise cash: add to the numerator through financing.
Because both take time, the discipline is to watch runway continuously and act well before it gets short. A company that waits until runway is nearly gone to raise or restructure does so from weakness, with fewer options and worse terms, while one that acts with a year of runway ahead negotiates from strength.
Why timing matters more than the number
The trap in runway is treating it as a number you monitor rather than a horizon you plan against. Fundraising can take months, and cost restructuring cannot happen overnight, so the runway that matters for a decision is the runway minus the time it takes to change course. Many operators aim to keep well over a year of runway and begin raising or adjusting long before it runs low, because letting it get short removes options exactly when they are most needed. Runway also connects to efficiency: a company with a strong Rule of 40 and a reasonable burn multiple is converting its burn into growth, which makes the next raise easier and the runway more valuable. And because runway depends on actual cash, not booked revenue, the cash-timing realities captured in cash flow forecasting determine the real horizon. Knowing your runway, and planning against it with time to spare, is the most basic form of financial control an unprofitable company has.
Frequently Asked Questions
What is cash runway?
Cash runway is the number of months a company can keep operating at its current net burn before it runs out of cash. It is calculated as cash on hand divided by monthly net burn. A company with 3,000,000 in the bank burning 250,000 a month has about twelve months of runway, which is the time it has to reach profitability or raise more.
How do you extend runway?
Two levers: reduce net burn or raise more cash. Net burn falls by growing revenue or cutting costs, both of which stretch the existing balance further. Raising capital adds to cash on hand. Companies typically manage runway by watching it continuously and acting well before it gets short, since raising or cutting under pressure is far harder than doing so with time to spare.
How much runway should a company have?
Conventions vary, but many operators aim to keep well over a year of runway, and to start raising or adjusting long before it runs low, because both fundraising and cost restructuring take time. Letting runway get short removes options and weakens negotiating position. The exact target depends on stage, market, and how quickly the company can change its burn.
Put these metrics to work
ORM builds custom revenue forecast models that turn concepts like cash runway into prescriptive action for your team.
Schedule a Demo