- What's the difference between runway and burn rate?
- Burn rate is backward-looking — it answers "how much cash did we lose per month last quarter?" Runway is forward-looking — it answers "at the current rate, when does the bank account hit zero?" Both come from the same numbers (cash, revenue, expenses), but they're used at different moments. Investors quote burn rate to evaluate efficiency; founders quote runway to plan the next move. This tool computes runway; if you want a backward-looking burn rate, use the Burn Rate Calculator (separate tool).
- How is runway computed when revenue and expenses both have growth rates?
- The projection walks one month at a time. For month t (starting from 1), revenue = baseRevenue × (1 + revGrowth)^(t−1), expenses = baseExpenses × (1 + expGrowth)^(t−1), and cash at end of month t = cash at end of month t−1 + revenue − expenses. The loop stops at the first month cash ≤ 0 (the zero month), or at 120 months for businesses that survive a 10-year window. Compounding both sides separately is the standard finance approach — it captures the realistic case where revenue might grow 5%/month while expenses creep 1-2%/month.
- What counts as "zero" — exactly zero, or negative?
- The tool flags the first month where end-of-month cash is ≤ 0. In practice, businesses don't actually hit a precise zero — payroll fails, the credit card declines, vendors stop shipping, all somewhere in the last few thousand dollars. Treat the zero month as the deadline, not as the literal end. Most founders aim to start fundraising at least 6 months before zero, because closing a round under the gun is the worst possible negotiating position.
- How much runway should a startup have?
- There's no single number — it depends on stage, market, and revenue trajectory. The rough convention: pre-revenue or pre-product-market-fit startups should hold 18-24 months at all times, because fundraising can take 6 months and you need buffer for a second attempt. Post-PMF startups with growing revenue can run thinner — 12-18 months — because the next round is easier. Profitable businesses don't need runway in the venture-funded sense; they need a healthy cash reserve (3-6 months of operating expenses) for emergencies. Under 9 months at any stage is the red zone.
- Why does my runway change so much when I tweak the revenue growth rate?
- Because compounding is non-intuitive. 5%/month growth means revenue doubles every 14.2 months — over a 2-year projection, that's a 4× difference between the start and the end. Small differences in monthly growth produce huge differences in cumulative cash. This is also why investors stress-test growth rates so heavily: a startup projecting 10%/month growth and a startup projecting 3%/month growth have wildly different runways from the same starting numbers, but only one of those growth rates is likely real. Use the calculator with multiple scenarios — optimistic, realistic, pessimistic — not just the rosy one.
- Should I include unpaid invoices and receivables as cash?
- No. Runway is a cash question, not an accounting question. An invoice you sent yesterday is not cash until it's collected. Including AR in the cash field will give you a falsely optimistic runway — and the moment a customer pays 60 days late, the actual zero month arrives much earlier than the model predicted. The rule: only count money you can transfer to a vendor today. If you have a signed-and-funded credit line you haven't drawn yet, that counts; a pipeline of "verbal commitments" doesn't.
- Should I model my own salary as an expense?
- Yes — runway is what's left after every cost, and founders skipping their own salary creates a false picture. If you're going to be paying yourself $5k/month starting in 4 months, model the expense at that level today (or build a more sophisticated step-up model in a spreadsheet). The same applies to deferred-comp arrangements: you owe yourself the money even if you haven't taken it, and an honest runway reflects that obligation.
- What if my expenses are highly variable — should I average them?
- For runway planning, use trailing-3-month or trailing-6-month average expenses, not last month's total. Software billing renewals, contractor bursts, and quarterly hosting commitments make any single month a poor sample. The averaged number is what your business actually consumes; the volatility around it is something to budget separately (a small reserve to cover variance, separate from runway).
- Why does the tool cap projections at 120 months?
- Because beyond 10 years, the model isn't predictive. Markets shift, founders leave, products get disrupted, growth rates almost never hold for a decade in either direction. The 120-month cap protects against over-interpreting a projection that has long since stopped meaning anything. If the projection survives 120 months, the tool labels the runway "indefinite" — not because the future is certain, but because at the modeled rates, the business is self-funding and runway is no longer the binding constraint.
