How long could you keep going if revenue stopped?
The number of months the business could cover its costs from the cash it holds. It turns a bank balance into a clear measure of how much time the business has to respond to a shock.
Get a finance reviewGross runway = Available cash ÷ Average monthly outgoings. Net runway = Available cash ÷ Average monthly cash shortfall
Three months of gross runway is a common minimum for established businesses; six months or more for those with lumpy or project-based income. Loss-making businesses usually aim for 12 to 18 months of net runway.
Available cash, plus any committed but undrawn facilities, divided by average monthly cash outgoings. A second version, net runway, uses the monthly cash shortfall after expected income, and is the more relevant measure for loss-making or fast-growing businesses.
Cash runway is the time available to make decisions. With plenty of it, a lost client or a slow quarter can be managed calmly. With little, choices narrow quickly and are made under pressure. For businesses that are investing ahead of revenue, it sets the deadline by which the plan needs to start working or new funding needs to be in place.
Use realistic outgoings, including VAT, PAYE, corporation tax and loan repayments, which are often missed. Exclude cash that is not really available, such as client money or VAT collected but not yet paid. Update it monthly and forecast it forward, as a runway that is shortening is more important than its current length.
Most owner-managed businesses don't, or they work it out in a way that flatters the result. We'll calculate it from your own numbers and show you what it's telling you.
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