Runway math every founder should be able to do in their head

Runway is the single most useful number a founder carries around. It is how many months you can keep going before the bank account hits zero. You should be able to estimate it without opening a spreadsheet, because the moments you most need it — a hiring decision, a slow sales month, a contract that lands or slips — rarely happen at your desk with a model open.

The good news is that the core math is grade-school arithmetic. The skill is not the division. It is knowing which two numbers to divide, and knowing when the answer should actually change what you do next. Let me walk through both.

Gross burn vs. net burn

Two numbers get called "burn" and people mix them up constantly. Gross burn is everything that leaves your account in a month — payroll, rent, software, contractors, the lot. Net burn is gross burn minus the cash that comes in from customers. Net burn is the one that drains the bank.

Here is a quick example. Say you spend $80,000 a month and collect $30,000 from customers. Your gross burn is $80,000. Your net burn is $50,000. If you ever hear someone say "we burn $80k" while quietly banking $30k, they are scaring themselves with the wrong figure. Use net burn for runway, every time.

One honest caveat: use cash that has actually arrived, not invoices you have sent. A $30,000 invoice on 60-day terms is not $30,000 of inflow this month. If your collections are lumpy, average the last three months of real cash received so one big payment does not flatter the picture.

The formula, and the head-math version

Runway equals cash in the bank divided by net monthly burn. That is it. With $600,000 in the bank and net burn of $50,000 a month, you have 12 months. If burn were $75,000, you would have 8 months.

To do this quickly in your head, round hard. Carry your cash balance in round numbers — "about $600k" — and your net burn in round numbers — "about $50k." Then it is just 600 over 50, which is 12. You do not need precision to two decimal places to know whether you are looking at 4 months or 14. The order of magnitude is what drives decisions, and the order of magnitude is easy to hold in your head.

• Cash on hand: use the real bank balance, not including money you owe but have not paid yet.
• Net burn: average net burn over the last 3 months, not your best month.
• Divide, round down. 11.6 months is 11 months of real choices, not 12.
• Recheck whenever cash or burn moves more than about 15 percent.

Sanity-check it before you trust it

A runway number can be quietly wrong in ways that hurt. Three fast checks catch most of the trouble. First, does it square with reality — if the formula says 18 months but your balance dropped $90,000 last month on $50,000 of claimed burn, one of those numbers is off. Second, is anything big about to land that the average misses, like an annual software renewal, a tax payment, or a quarterly bonus. Those are real cash-outs even though they do not happen monthly.

Third, watch for one-off cash that inflated a recent month. If a customer prepaid a year up front, your net burn last month looked tiny or even negative. That is not your real run-rate. Strip out the one-time event and ask what a normal month looks like. A founder who confuses a lucky month for the new normal will plan to spend money that is not really there.

Runway today vs. runway after the hire

This is the version most founders skip, and it is the one that matters when you are about to commit. Runway on today's spend is a snapshot of the past. The decision in front of you usually changes the future. Before you sign an offer letter, redo the math on the burn you will have after the hire, not the burn you have now.

Take the 12-month example again: $600,000 in cash, $50,000 net burn. You are about to hire someone whose fully loaded cost — salary plus payroll taxes, benefits, software, and equipment — is about $10,000 a month. Note that fully loaded is usually 1.2 to 1.4 times the base salary, so a $96,000 salary is closer to $120,000 a year all in. Add that $10,000 and your net burn becomes $60,000. Runway drops from 12 months to 10. One hire just cost you two months of life. That might be completely worth it. But you should make that trade on purpose, with the real number in front of you, rather than discover it a quarter later.

The same logic runs in the other direction. If a signed customer adds $15,000 of monthly cash starting next month, your net burn falls from $50,000 to $35,000 and your runway stretches from 12 months to about 17. Model the change you are actually making. Runway is only useful as a forward number.

When the number should change your decisions

Runway is not just a metric to report — it is a set of trip-wires. As a rough guide: under 6 months, you are in raise-or-cut territory and most discretionary spending should stop. Between 6 and 12 months, you can still invest, but every new commitment should be weighed against the months it costs. Over 18 months, you have room to make bets, and the bigger risk is moving too slowly rather than running out of cash.

The point of being able to do this in your head is speed. When a salesperson asks to add a tool, when a co-founder floats a second hire, when a deal slips a month, you can answer in the room: what does this do to runway, and does that change the decision. Keep cash and net burn as two numbers you always know, redo the division when either moves, and always model the hire or the deal you are about to make rather than the one you already made.