Cash runway
Lesson 9 of 13 in our free Business Money Advanced guide: a 5-minute money game with the key points below.
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Questions you'll answer
Dex spends £26,000 a month and brings in £12,000 a month. What are his gross burn and net burn?
Dex has £84,000 in the bank and a net burn of £14,000 a month. How many months of runway is that?
Quick facts
- Cutting costs that don't help win or keep customers → Sensible. Lower net burn = longer runway.
- Starting to look for funding now, not in month five → Sensible. Raising money or getting a loan usually takes months.
- Doubling ad spend so revenue 'catches up' → Panic. If each customer loses money, this shortens the runway.
- Paying staff wages with a personal credit card → Panic. That moves the problem onto you, at a high interest rate.
- Building a month-by-month cash forecast → Sensible. You can't steer what you can't see.
- Fact: “Runway can shrink even if spending stays flat.” — If income drops, net burn rises and runway shortens.
- Fact: “A business with positive cash flow every month has no runway problem.” — If more comes in than goes out, cash isn't running down. It's the cash-burning ones that need to count months.
- Myth: “Runway is worked out from gross burn, ignoring income.” — It uses net burn: spending minus income. Gross burn alone would understate the runway.