How to Calculate Runway and Burn Properly (Most Founders Get This Wrong)

“How many months of runway do you have?” sounds like a simple question. Most founders answer it with a simple formula, and most overestimate the answer.

Gross burn vs net burn

• Gross burn: Total cash going out each month.
• Net burn: Cash going out minus cash coming in.
• Runway: How many months your cash lasts at your net burn.

The simple calculation

Numbers in this example are illustrative.

• Cash in bank: ₹1.2 crore
• Monthly cash out: ₹45 lakh
• Monthly cash in: ₹30 lakh
• Net burn: ₹15 lakh

Simple runway = ₹1.2 crore ÷ ₹15 lakh = 8 months

Why that number is usually wrong

Burn rarely stays flat. Teams grow, ad spend rises, and inventory needs increase. Suppose net burn rises by ₹1 lakh each month:

The ₹1.2 crore runs out during month 7, not month 8. That’s a month less time than you planned for.

How to calculate runway properly

1. Use projected burn, not last month’s burn.
2. Include inventory purchases and one-off payments, like festive stock or annual subscriptions.
3. Use actual cash timing, including delayed marketplace settlements.
4. Don’t count cash you don’t control yet, such as uncommitted investment.
5. Recalculate monthly.

When to start fundraising

Fundraising often takes several months from first conversations to money in the bank. Many founders aim to start with at least 6-9 months of runway left, so they’re never raising from a position of urgency.

FAQs

What’s a healthy runway?

Enough to reach your next milestone and complete a raise with time to spare. Many founders aim for 12-18 months after a raise.

How can I extend runway without raising?

Cut low-return marketing, reduce inventory, negotiate supplier terms, and speed up collections.

Should I include expected revenue growth?

Yes, but conservatively, and also check your runway in a slower-growth scenario.