How much runway do you have, counting the lumpy months
Cash divided by average burn is the number everybody quotes, and it is wrong whenever a large payment is due before the money runs out.
The short answer
Runway is how many months your cash lasts at your current burn. Dividing cash by average monthly burn works only when spending is level, and it overstates runway whenever a large irregular payment falls inside the period, which it usually does.
The formula
monthly burn = cash out - cash in
simple runway = cash / monthly burn
month-by-month: closing = opening - burn - any irregular payment that month
true runway = the month in which closing balance first goes below zero
The irregular payments are the whole point. Tax, insurance renewals and annual software are all predictable a long way ahead and none of them appear in an average.
Worked example
$42,000 of cash, revenue of $18,500 a month against costs of $23,200, and a $6,800 tax payment due in month three:
monthly burn = 23,200 - 18,500 = 4,700
simple runway = 42,000 / 4,700 = 8.9 months
after 3 months: 42,000 - 14,100 - 6,800 = 21,100
remaining at 4,700 a month = 4.5 months
true runway = 3 + 4.5 = 7.5 months
The division says 8.9 months and the calendar says 7.5. That 1.4 month gap is the difference between raising or cutting comfortably and doing it in a hurry.
Why the average always flatters
Averages smooth out exactly the events that break a cash position. Every irregular payment gets spread across twelve months in the arithmetic and arrives whole in reality.
It compounds with timing. A large payment in month two hurts far more than the same payment in month eight, because it removes cash while you still have the whole runway ahead of you to fund.
What counts as the end of runway
Not a zero balance. It is the point where you cannot make payroll or pay a supplier who will stop supplying you, and that arrives before zero.
Set a floor and treat that as the end. If you need $8,000 to operate without a crisis, your runway ends when the balance hits $8,000, not $0. On the numbers above that shortens it by nearly two months again.
The levers, in the order they actually work
Collection first. Money already owed to you is the fastest cash available and it costs nothing but a phone call.
Then timing: supplier terms, deferring a purchase, moving an annual renewal to monthly even at a premium. Buying time is often worth paying for when the alternative is raising money badly.
Cutting costs is slower than it looks. Notice periods, contracts and redundancy costs mean a cut decided today frequently does not reduce cash out for a quarter, which is why it should be decided earlier than it feels necessary.
What this leaves out
- Assumes revenue holds at the current level. A forecast that assumes growth while calculating runway is measuring a hope rather than a floor.
- Excludes financing already available, such as an undrawn overdraft, which extends runway and should be shown separately.
- Assumes you know your irregular payments. The ones people forget are annual insurance and the second tax instalment.
This arithmetic is free to run in your browser — no signup, nothing held back.
Open the free calculatorCommon questions
- How much runway should a small business keep?
- Three to six months of operating costs is the common guidance and the honest answer depends on how quickly your revenue could recover from a bad quarter. A business with long sales cycles needs more than one paid on delivery.
- Does an overdraft count as runway?
- It extends it and should be shown as a separate line rather than added to cash. Facilities can be reduced or withdrawn, and they tend to be reviewed at exactly the moment you need them.
- How often should I recalculate runway?
- Monthly when comfortable and weekly when under six months. The frequency should rise as the number falls, which is the opposite of what usually happens.
Spreadsheets that do this
The formulas above, already built and checked — so you fill in your numbers rather than the arithmetic.
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Last reviewed 22 August 2026