Months of runway
Survival horizon; moot if cash-flow positive.
- Formula
- Cash / net monthly burn
- Unit
- months
- Models
- All models
| standard target | 18 mo–24 mo | J.P. Morgan |
| conservative target | 24 mo–36 mo | J.P. Morgan |
| scrutiny threshold | <6 mo | J.P. Morgan |
What it is
Months of runway measures how many months a company can operate before exhausting its cash, assuming current burn continues. The formula is Cash / Net monthly burn.
How to calculate it
Divide total available cash (and equivalents) by the average net monthly burn rate. Net burn is total cash outflows minus cash inflows from operations and revenue. Some operators use trailing three-month average burn to smooth volatility; others use the most recent month if costs are rising rapidly.
Why it matters
Runway determines how much time a company has to hit milestones, raise capital, or reach profitability. It is the most fundamental measure of survival and one of the first things investors, boards, and CFOs monitor. Insufficient runway forces distressed fundraising or cuts at the worst possible time.
Benchmarks & pitfalls
J.P. Morgan (2024) guidance — a directional rule of thumb, not a rigorous study — puts the standard target at 18–24 months and a conservative target at 24–36 months. Falling below 6 months is the near-hard line that draws investor scrutiny and signals an acute fundraising need. The main pitfall is using a burn rate that understates true costs: exclude equity-settled SBC from cash burn but include all cash-settled items, upcoming obligations, and any seasonality that could spike costs. Also distinguish between gross burn and net burn — net burn nets out revenue, and conflating the two gives a misleading picture.