How to Calculate Cash Runway for a Small Business

Cash runway tells you how many months your business can keep going on the money it has today. Here is the formula, a worked example, and what to do when the number is shorter than you want.

Read

4 min read

Published On

Oct 23, 2026

Read: 5 minutes

Last updated: November 6, 2026

In this guide

What cash runway means
The formula, with a worked example
Why a single month can mislead you
Five ways to extend your runway

What Is Cash Runway?

Cash runway is the number of months your business can keep operating on the cash it has right now, if nothing changes.

Profit does not answer that question. A business can be profitable on paper and still run out of cash, because customers pay late, stock gets bought before it sells, and payroll does not wait for either. Runway is the number that shows the timing.

The Cash Runway Formula

Cash runway = cash in the bank ÷ net monthly burn

Or use the cash runway calculator and let it do the math.

Net monthly burn is what leaves the business in a month, minus what comes in.

Say a business has $60,000 in the bank. In a typical month, $85,000 comes in and $97,000 goes out.

Net monthly burn: $97,000 − $85,000 = $12,000
Cash runway: $60,000 ÷ $12,000 = 5 months

If more comes in than goes out, your burn is negative and runway does not really apply. The better question then is how low your balance gets during the month, because that is where a healthy business still gets caught.

Why a Single Month Can Mislead You

One month is rarely a fair picture. Three things throw it off.

Seasonality

A landscaper in July and a landscaper in January are two different businesses. Average your burn over at least three months, and if your year has a strong shape, compare against the same months last year.

Lumpy costs

Annual insurance, quarterly tax remittances and a big supplier order all land in one month. Spread them across the year when you estimate burn, then keep the real dates on a calendar so they do not surprise you.

Money that is owed, not received

Use cash actually received, not invoices sent. If your customers take 45 days to pay, a strong sales month shows up in the bank about six weeks later.

How Much Runway Is Enough?

There is no single right number. It depends on how steady your revenue is and how quickly you could cut costs.

A useful test is to ask how long you would need to respond to a bad quarter, then recalculate your runway as if it had already happened. Businesses with steady, repeat revenue can run closer to the line than businesses that depend on a few large contracts.

The Slate View

Your runway may be shorter than your bank feed says. An underwriter's habit is worth borrowing here: ask which deposits are really sales. Money you put in yourself and borrowed funds both land in "money in", and neither is revenue.

Take the example above. If $10,000 of the $85,000 was an owner top-up, money in is $75,000, burn is $22,000 and runway is 2.7 months, not 5. If your largest customer is another $20,000 of that, and they left, burn is $42,000 and runway is 1.4 months. Costs would fall a little if that customer left, but that is the conversation to have before it happens.

Five Ways to Extend Your Runway

Collect faster. Invoice the day the work is done, shorten your terms, and follow up on anything overdue.
Line up your payment dates. Ask suppliers for terms that fall after your customers usually pay you.
Trim recurring costs. Subscriptions and unused services are the easiest place to start.
Buy stock closer to when it sells. Cash sitting on a shelf is not available for payroll.
Arrange funding before you need it. Options are better and cheaper to weigh when your balance is healthy. See how a credit line compares with a cash advance.

Keep the Number Current

Runway changes every time your sales or costs do, so it is worth checking monthly. Slate Signals can read your numbers in Claude or ChatGPT and tell you how your business is really doing, including when cash is likely to get tight.