With higher rates and tighter diligence, investors don’t need perfect forecasts—they need reproducible cash math. Here’s a simple, auditable way to calculate runway, show downside protection, and align hiring/GTM with what your bank balance can actually support.

KEY TAKEAWAYS

• Use netburn (exclude financing cash, restricted balances) for credible runway.
• Maintain Base / Downside / Upsidemonthly; re-baseline quarterly.
• Reconcile the model to bank movementand log assumption changes so anyone can reproduce the math.

 

What “Runway” Really Means (in plain English)

Runway is the number of months you can operate before cash hits zero if current assumptions hold. Trust comes from clean definitions and consistent math.

Formula (copy & paste):
  Net Burn = Operating Cash Outflows − Operating Cash Inflows (exclude financing cash)
  *Runway (months) = Ending Cash ÷ Average Net Monthly Net Burn

Worked example:
 $5.4M cash ÷ $450k average net burn = 12.0 months runway → cash-zero: Oct 2026 (Base).

Clarify upfront

• Gross vs net burn:Use net (after customer receipts).
• Bookings vs cash:Keep revenue recognition separate from cash collections.
• One-offs:Annual prepaids, severance, refunds—flag so no one is surprised.

 

What Counts as “Cash” (and what doesn’t)

Include: bank cash and true cash equivalents.
Exclude / footnote: restricted cash, undrawn debt, contingent grants.
Working capital effects:

• DSO (receivables):slower collections tighten runway.
• DPO (payables):longer terms extend runway (stay relationship-safe).
• Inventory:builds consume cash; drawdowns release it.

 

Build a Monthly Burn View You Can Repeat

Keep it minimal but complete so a monthly refresh is easy.

Five input blocks

1. Headcount & comp(salaries, taxes, benefits, contractors)
2. Vendors & infra(cloud, tools, software, office)
3. GTM spend(paid, events, agencies, commissions)
4. COGS tied to usage(fees, hosting, support)
5. Other fixed(insurance, legal, audit)

 

Collections cadence

• Add DSO and a simple seasonality pattern (e.g., 120%/90%).
• Keep a credit memo/write-offline so inflows match bank reality.Output
• 13-month cash bridge:Opening Cash → Inflows → Outflows → Net Burn → Ending Cash.

 

The Scenario Table Investors Expect

Make assumptions visible; make the cash-zero date explicit.

Case	Revenue (N12M)	Avg Net Burn / Mo	Ending Cash Today	Runway (mo)	Zero-Cash Date	Notes
Base	$6.0M	$450k	$5.4M	12	Oct 2026	Hiring gates at $X ARR
Downside	$4.2M	$650k	$5.4M	8.3	Jun 2026	Win rate −20%, 60-day slip
Upside	$7.2M	$350k	$5.4M	15.4	Jan 2027	DSO −5d, price +3%

 

Note: All cases share the same timing framework (DSO/DPO/inventory). Only the listed assumptions change.

Sensitivity: What Moves Runway the Most?

Simple one-way sensitivities are enough—show runway delta per lever:

• DSO −5 days:+~1.0–1.5 months
• Delay 3 non-critical hires 60 days:+~0.7 months
• Vendor terms +15 days on top 3 contracts:+~0.4 months
• Paid CAC −10% (creative refresh):+~0.3 months via higher net contributionRanges are model-dependent; quantify with the worksheet and report the top three levers.

 

Covenant & Milestone Awareness

• Debt covenants:map monthly projection to minimum liquidity/leverage headroom.
• Board threshold:many boards want 12–18 months runway—state your position vs that bar.
• Next raise readiness:ARR, margins, logo proof, audit status.
• Available liquidity (not cash):undrawn revolver, venture debt tranches, vendor financing.Metric to add: Months to Target Raise = Runway − Months to reach milestone readiness.

 

Make the Math Trustworthy (Cadence & Controls)

Cadence

• Monthly refresh:update actuals from bank, roll forward 13 months.
• Quarterly re-baseline:lock prior quarter, reset Base/Downside/Upside.

 

Controls

• Bank reconciliation:tie model to cash movement; add a short variance note.
• Change log:date, owner, assumption, rationale.
• Versioning:monthly snapshots (Runway_vYYYY-MM.xlsx) for reproducibility.

 

Investor-ready “Runway Note” (paste into updates) 

• Runway: 2 months(Base), 11.1 (Downside), 16.3 (Upside)
• Cash-zero (Base): Nov 2026| Δ vs last month: +1.3 months (DSO −5d; two hires shifted 60d)
• Months to Target Raise:5 (Base)

 

Common Mistakes (and quick fixes)

• Using gross burn:switch to net by modeling inflows.
• Counting undrawn debt as cash:move to “available liquidity.”
• Ignoring working capital:add DSO/DPO and inventory timing.
• Mixing bookings and cash:separate recognition from collections.
• No scenarios/sensitivity:minimum viable is 3-case table + top-3 levers.

 

Mini Case Study (tight version)

A B2B SaaS entered Q2 with 9 months runway. By delaying three hires 60 days, renegotiating two vendors from Net 30 → Net 45, and improving DSO by 8 days via proactive dunning and quarterly prepay incentives, runway extended to 15 months. The investor update highlighted the cash-zero shift and permanently embedded levers into the monthly cadence.

Templates You Can Reuse

Formula callout (make a “Copy” button on the site):

Runway (months) = Ending Cash ÷ Avg Net Monthly Net Burn
  Net Burn = Operating Cash Outflows − Operating Cash Inflows (ex-financing).

Investor update snippet (drop-in):

• Runway:2 / 11.1 / 16.3 mo(Base/Downside/Upside)
• Cash-zero (Base): Nov 2026| Δ vs last month: +1.3 mo
• Top lever:DSO −5d adds +1.1 moInputs checklist (sidebar chip)
• Cash & equivalents (exclude restricted)
• Net burn definition
• DSO/DPO & inventory policy
• Headcount plan & hiring gates
• Vendor terms & COGS elasticity
• Covenants & board threshold

 

FAQ (brief)

• Count signed debt term sheet?Not until funded; show as available liquidity.
• Include pipeline?No—pipeline drives scenarios, not runway.
• Seasonality?Use a simple by-month inflow pattern; keep it transparent.
• Growth increases COGS—bad for runway?It can; tie COGS to usage and show unit economics in each case.