Glossary · UK
What is Cash Runway?
The number of months a business can keep operating at its current spending rate before it runs out of cash.
Full Definition
Cash runway is the length of time -- usually expressed in months -- that a business can continue operating before its cash reserves are exhausted, calculated by dividing current cash on hand by the net burn rate (monthly cash outflow after accounting for any cash coming in). For example, a business with GBP 300,000 in the bank and a net burn rate of GBP 25,000 a month has roughly twelve months of runway remaining at that spending rate. Runway is a central planning metric for start-ups and other cash-negative businesses, since it sets the deadline by which the business needs to either become cash-flow positive, cut costs enough to extend the runway, or complete a further round of funding -- most experienced founders and investors aim to start a fundraising process well before runway falls below about six months, since raising finance itself takes time and negotiating leverage weakens sharply the closer a business gets to running out of cash. Runway calculations are sensitive to assumptions about future revenue growth and cost increases (such as planned hiring), so a simple "cash divided by current burn" figure is often supplemented with a rolling cash flow forecast that models how burn is expected to change month by month rather than assuming it stays flat.