How many months of runway does my business actually have?
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Runway is not cash divided by last month’s burn. Revenue grows, costs step up, and the only question that matters is whether break-even arrives before the balance does not.
Two Dates, and Which One Comes First
Every business that is not yet profitable is running a race between two dates. One is the month the bank balance reaches zero. The other is the month revenue finally covers costs. If the second arrives first, the business survives on its own. If the first arrives first, it needs outside money, and the price of that money depends entirely on how close to the wall it is being raised.
The common way to estimate runway, cash divided by last month’s burn, gets this wrong in both directions. It ignores revenue growth, which lengthens the runway, and it ignores the cost increases that usually accompany growth, which shorten it. A business burning ₹5 lakh a month with ₹50 lakh in the bank does not have ten months if revenue is climbing, and it has fewer than ten if it is about to hire.
The model below runs both curves forward month by month. It reports the month the cash runs out, the month contribution first covers fixed costs, and the revenue level required to get there. Where break-even arrives first, it says so.
Cash Runway Model
Reading the Race Between the Two Dates
The break-even month is the month contribution first covers fixed cost, not the month cumulative profit turns positive. That distinction matters: a business can be break-even on a monthly basis while still holding a large accumulated deficit. For survival purposes the monthly crossover is the date that counts, because from that point the balance stops falling.
The cash left at break-even is the true safety margin. A plan that reaches break-even in month eighteen with ₹4 lakh left is not a plan that works, because every real business misses a forecast somewhere and there is nothing to absorb it. Treat anything under three months of fixed costs at the crossover as the same as running out.
The revenue figure needed to break even is worth committing to memory, because it converts an abstract worry into a target a sales team can be given. It also exposes the two ways of reaching it: sell more, or raise the contribution margin. Cutting variable costs by five points moves the break-even revenue figure more than most owners expect.
What Changes the Answer
Whether growth is genuinely compounding
A steady monthly growth rate is a convenient assumption and rarely how revenue behaves. Growth arrives in steps as clients sign and stalls between them. Run the model at half your assumed growth rate and see whether the answer still works; if it does not, the plan depends on the forecast rather than the business.
Costs that step up with growth
Fixed costs are fixed only within a range. Reaching the next revenue level usually needs another hire, a larger office or a higher software tier, and each of those pushes the break-even revenue up just as you approach it. Build the known steps into the fixed cost line rather than discovering them.
The gap between revenue and collection
This model treats revenue as cash in the month it is earned. If customers pay in 60 days, the real bank balance lags the model by two months and the runway is shorter than it shows. For a business selling on credit, run the working capital model alongside this one.
When you raise money, not whether
The cost of capital rises sharply as the balance falls, because the terms available to a business with six months of runway and one with six weeks are not comparable. If the model shows a gap, the decision to raise should be made months before the number becomes urgent.
How We Calculated This
The Decision Framework
Frequently Asked Questions
How much runway should a business keep?+
Is runway the same as cash divided by burn?+
What is the difference between break-even and profitability?+
Should I cut costs or chase revenue when runway is short?+
Does this model account for customers paying late?+
When should I start raising money?+
Sources and Method References
- Ministry of Corporate Affairs — financial reporting and going concern requirements
- Reserve Bank of India — working capital and business credit guidelines
- Startup India — funding and recognition framework
The concept behind the number
This scenario gives you a figure. These pages give you the idea it comes from, the words on the inputs, and the article that works through the decision.