Burn and runway · Finance Platform

What net burn is, how runway follows from it, and why the platform reports both a simple runway and the month cash actually runs out.

Net burn

Net burn is how much cash the company loses in a month: cash going out minus cash coming in.

\text{net burn} = \text{cash out} - \text{cash in}

A company that spends 80,000 and collects 30,000 in a month has a net burn of 50,000.

Runway

Runway is how many months the current cash lasts at that burn:

\text{runway} = \frac{\text{current cash}}{\text{average monthly net burn}}

With 600,000 in the bank and an average net burn of 50,000, runway is 12 months. The platform averages the burn over the next three months by default, so one unusual month does not distort the figure. If the company is not burning cash, there is no runway figure: cash is not running out.

Runway changes over time

Burn rarely stays flat: hires add cost, revenue grows. So the forecast also reports the first month cash goes below zero and the lowest runway over the whole horizon. The lowest runway is the figure to check before a hire; see Check runway before a hire.

Funding need

If you want to always keep a minimum cash buffer, the funding need is how far the lowest cash balance falls below that buffer:

\text{funding need} = \max\bigl(0,\; \text{buffer} - \text{lowest cash}\bigr)

With a buffer of 100,000 and a lowest cash balance of 40,000, the funding need is 60,000.

The exact formulas

Forecast formulas: runway, cash-out, funding need, break-even