Startup Runway & Burn Rate Calculator

About the Startup Runway & Burn Rate Calculator

Runway is how many months a startup can keep going on the cash it has. Enter the cash in the bank, this month’s revenue and expenses, and the calculator gives the gross burn (what goes out each month), the net burn (what goes out minus what comes in) and the simple runway, cash ÷ net burn.

Then it projects the months ahead with your revenue growth, rising costs, the hires you plan and a fundraise, and shows the month the cash runs out, the month revenue covers expenses, and how much more cash it would take to get there. It also runs Paul Graham’s default alive test: with expenses held where they are and revenue growing as it has, do you reach profitability on the money you have — and if not, what growth would get you there?

Common uses

• Know the month the money runs out before you plan hiring or a raise.
• Size a fundraise: how much cash carries the plan to break-even.
• Check whether you are default alive at today’s growth — and what growth would make you so.
• Show the board or investors a month-by-month cash projection.

Gross burn, net burn and runway

• Gross burn = everything the company pays out in a month: salaries, rent, tools, marketing.
• Net burn = gross burn − the cash that comes in from customers. It is the monthly loss in cash.
• Runway = cash ÷ net burn: 600,000 ÷ 50,000 = 12 months.

The simple runway assumes nothing changes. Revenue usually grows and so do costs, which is why the calculator also projects the months ahead and finds the month the balance drops below zero.

The projection

Each month t, revenue is this month’s revenue × (1 + growth)^t and expenses are today’s expenses × (1 + cost growth)^t plus every planned hire who has started. The cash at the end of the month is the last balance + revenue − expenses, plus the fundraise in the month it arrives. The month the balance falls below zero is when the cash runs out; the runway counts the part of that month it lasted. Break-even is the first month revenue covers its expenses.

The more cash to reach break-even figure is the deepest the balance goes before break-even (without the raise, if you entered one): raising at least that much, in time, carries the plan to profitability.

Default alive or default dead

Paul Graham’s question: “Assuming their expenses remain constant and their revenue growth is what it has been over the last several months, do they make it to profitability on the money they have left?” A company that does is default alive; one that does not is default dead and needs new money (or a change) to survive. The test therefore keeps expenses at today’s level and leaves fundraising out — planned hires and cost growth only change the projection. The calculator also finds the lowest monthly revenue growth that would make you default alive on today’s cash.

Graham’s advice is to ask the question early, because a company that finds out late may not have time to fix it. Source: Paul Graham, “Default Alive or Default Dead?”.

Limitations

• A model, not a forecast: growth rarely stays the same each month. Try a lower and a higher growth rate to see how sensitive the runway is.
• Revenue is cash in and expenses are cash out. Payment terms, annual prepayments, taxes, loans and one-off costs are not modelled; use the cash flow forecast planner for those.
• Hires cost the same every month from their start month; raises and other costs grow only through the cost growth rate.
• The projection looks up to 20 years ahead; the table and charts show the months you pick.

Privacy

Everything is worked out in your browser. Your cash, revenue, costs and hiring plan are never uploaded.