Runway is how long a business can continue operating at its current burn rate before its cash is exhausted, measured in months and recalculated every time the cash position or burn rate changes.
Runway is burn rate’s partner. Burn rate tells the pace of cash consumption. Runway tells the consequence, how many months of operating capacity remain at that pace. A business with $300,000 in cash and a net burn of $50,000 per month has six months of runway. Whether that is comfortable or urgent depends entirely on what is happening to revenue and what financing options are available within that window.
For businesses that are not yet profitable or are investing ahead of revenue, runway is the single most important financial metric to track and communicate. Investors and lenders want to know it. Decisions about hiring, marketing spend, and capital expenditure all need to be made with a clear view of how they affect it. Running out of runway without a plan in place is not a financial problem. It is an existential one.
See also: Burn Rate · Cash Reserves · Cash Flow ForecastKnowing runway precisely, and what extends or shortens it, is non-negotiable for any business consuming more cash than it generates. See how Wefinx approaches Virtual CFO services.