What is runway?

Runway is the length of time a company can keep operating before it runs out of cash. It is found by dividing the cash on hand by the monthly net burn. It matters because it gives leaders a deadline: the point by which they must reach profitability, raise money or cut costs.

How it works

Runway in months = cash balance ÷ net monthly burn. A company with 300,000 and a net burn of 25,000 has 12 months. The figure moves whenever either part changes: raising money adds to the cash, while hiring or falling revenue raises the burn and shortens the runway.

There is a practical catch. Raising new funds or reaching profit takes time, often several months, so the real deadline to act is well before runway hits zero. Many teams treat a runway of under 6 to 9 months as a signal to act. Runway based on today's burn is also only an estimate if burn is changing, so it is worth checking against a forecast.

Example

Say a team has 450,000 and spends 70,000 per month while earning 10,000, so net burn is 60,000. Runway is 450,000 ÷ 60,000 = 7.5 months. If they plan to hire two people and raise burn to 75,000, runway drops to 6 months. If they win a customer worth 15,000 per month, burn falls to 60,000 again and runway returns to 7.5 months. These are illustrative figures.

How to model it in Machinations

Build a cash Pool with a Drain for monthly spending and a Source for revenue, and a Register that divides the Pool's value by net burn to display runway. Add an End condition for when the Pool is empty. Expose spending and revenue growth as Levers. Play many times at once with uncertain revenue, then compare how often the Pool runs out before month 12.