Short answer: Net burn = the cash that goes out in a month minus the cash that comes in. Runway = cash in the bank ÷ average monthly net burn. With €1,140,000 in the bank and a net burn of €60,000 a month (averaged over the last three months), the runway is 1,140,000 ÷ 60,000 = 19 months.
Runway is the one number every company that is not yet profitable plans around: it is the date the money runs out if nothing changes. It is simple to calculate and easy to get wrong, usually by using the wrong burn.
What is the difference between gross burn and net burn?
| What it counts | Example month | |
|---|---|---|
| Gross burn | All cash going out: salaries, rent, software, everything | €95,000 |
| Cash coming in | Customer payments | €35,000 |
| Net burn | Gross burn − cash coming in | €95,000 − €35,000 = €60,000 |
Runway uses net burn: it is what actually leaves the bank. Gross burn still matters, because it is what you would burn if revenue stopped, the worst case.
Use cash, not profit. A customer who has not paid yet, a yearly licence paid up front, or a big invoice paid in advance all make profit and cash differ for months. The simplest measure is the bank balance itself: cash at the start of the month minus cash at the end.
What is the runway formula?
Runway (months) = Cash balance ÷ Average monthly net burn| Input | Value |
|---|---|
| Cash in the bank | €1,140,000 |
| Net burn, last three months | €52,000, €61,000, €67,000 |
| Average net burn | 180,000 ÷ 3 = €60,000 |
| Runway | 1,140,000 ÷ 60,000 = 19 months |
Why average three months?
Because one month lies. Using only the €52,000 month gives 21.9 months of runway; using the €67,000 month gives 17. A yearly insurance bill, a big customer paying late or three salaries starting at once can swing a single month by a lot. Three months smooths that out.
Also look at the trend in those three months: 52, 61, 67 is rising. If it keeps rising, the real runway is shorter than 19 months. The formula assumes burn stays flat; for planned changes (new hires, a price rise), project the cash month by month instead and mark the month it reaches zero.
How much runway is enough?
KPI Atlas gives the common rule: many boards want 18 to 24 months after a funding round, and start raising again with 9 to 12 months left. Raising money takes months, and doing it with three months left means negotiating with no time to walk away.
Paul Graham's test is sharper. Assuming expenses stay the same and revenue keeps growing as it has over the last few months, "do they make it to profitability on the money they have left?" If yes, the company is "default alive"; if not, "default dead". The runway number answers half the question; revenue growth answers the other half.
What is the burn multiple?
For subscription companies, how much cash you burn for each euro of new recurring revenue:
Burn multiple = Net burn ÷ Net new ARR€180,000 burned in a quarter to add €150,000 of net new ARR is a burn multiple of 1.2. On the scale KPI Atlas quotes (David Sacks'), under 1 is often called amazing, 1 to 1.5 great, and above 2 a concern. A quarter with almost no new ARR makes it explode, so read the two parts, not just the ratio. How to calculate MRR and ARR covers the second one.
Is burn rate the same in project management?
No, same name, different number. A project's budget burn rate compares what was spent with what was planned for the period:
Budget burn rate = Actual cost in the period ÷ Planned cost in the period × 100108% means the project spent 8% more than planned this period. It only means trouble if progress did not speed up to match: fast burn with fast progress is fine.
How do you calculate runway in Power BI with DAX?
As KPI Atlas gives it, with the burn averaged over the last three months:
Runway Months = DIVIDE ( [Cash Balance], AVERAGEX ( DATESINPERIOD ( 'Date'[Date], MAX ( 'Date'[Date] ), -3, MONTH ), [Net Burn] ) )How do you calculate it in SQL and Excel?
SQL, from a table with one row per month:
SELECT cash / NULLIF(AVG(net_burn) OVER (ORDER BY month ROWS 2 PRECEDING), 0) AS runway_months FROM monthly_cash ORDER BY month DESC LIMIT 1;Excel, with the cash in one cell and the last three months of burn in a named range:
=Cash / AVERAGE(LastThreeMonthsBurn)How should you show runway?
An area chart of the cash balance projected forward, with the zero date marked, says more than any number. A card with the months left keeps it in view, and a line chart of monthly burn shows whether it is creeping up.
Where can you check this?
Where do you find runway and the finance KPIs around it?
KPI Atlas has cash runway, burn multiple and budget burn rate with their formulas, the DAX, SQL and Excel above, the mistakes to avoid and their best charts drawn, next to operating cash flow and the other finance KPIs. It holds 455 KPIs for 30 areas of a business.
