How to Calculate Your Cash Runway (And Why It Matters)

What Is Cash Runway?

Your cash runway is the number of days your business can continue operating at its current burn rate before running out of cash. It's one of the most critical metrics for small business owners, yet many don't track it regularly—until it's too late.

Think of it as your business's fuel gauge. Just like you wouldn't drive a car without knowing how much gas you have, you shouldn't run a business without knowing how many days of cash you have left.

The Simple Formula

Calculating your cash runway is straightforward:

To find your average daily burn rate, look at your last 30-90 days of expenses and divide by the number of days. For example:

Why This Metric Matters

Knowing your cash runway helps you:

• Make informed decisions about hiring, spending, and investments
• Identify cash flow problems before they become crises
• Plan fundraising or financing needs with enough lead time
• Prioritize which invoices to chase and which expenses to defer
• Sleep better at night knowing exactly where you stand

Common Mistakes to Avoid

Many business owners calculate their runway incorrectly by:

• Using monthly expenses instead of daily (doesn't account for timing)
• Ignoring upcoming one-time expenses (tax payments, equipment purchases)
• Forgetting about accounts receivable (money you're owed but haven't received)
• Not accounting for seasonal variations in revenue

When to Worry

As a general rule:

• 30+ days: You're in good shape, but keep monitoring
• 15-30 days: Start taking action to extend your runway
• Under 15 days: This is a red flag—immediate action required

The key is to track this metric weekly, not just when you're worried. By the time you're down to 15 days, your options are limited. But if you catch it at 45 days, you have time to make strategic changes.