How Startup Runway Calculator works

1. Scope

The Startup Runway Calculator projects months until cash hits zero, given a starting balance, a monthly burn, and optional revenue with a compounding growth rate. It is deterministic — one scenario at a time — and does not model fundraising probability, dilution, or non-operating cash movements (debt repayments, tax refunds, asset sales).

2. Inputs and outputs

Inputs: cash, monthlyBurn, monthlyRevenue, revenueGrowthRate (month-over-month compounding), burnGrowthRate (for hiring plans or cost inflation). Outputs: runwayMonths, a per-month trajectory (cash, revenue, gross burn, net burn), and the first month net burn turns negative (revenue-covers-burn) when it happens within the horizon.

Engine source: src/lib/startup-runway/engine.ts.

3. Formula / scoring logic

for m = 1..horizon (default 60):
  revenue_m   = revenue_0 * (1 + revenue_growth) ^ m
  burn_m      = burn_0    * (1 + burn_growth)    ^ m
  net_burn_m  = max(0, burn_m - revenue_m)
  cash_m      = cash_{m-1} - net_burn_m
stop when cash_m <= 0   -> runway_months = m

4. Assumptions

• Constant compounding growth for revenue and burn. Real trajectories show ramp → linear → plateau. The tool is accurate for the first 6–12 months of a stable growth regime; past that, the projection is optimistic.
• Cash equals P&L. No AR/AP timing, no deferred revenue, no receivable aging. For accrual-to-cash conversion, deflate revenue by expected collection days.
• Net burn floors at zero. Once revenue covers burn, cash is held constant in the projection — the tool does not model cash accumulation, only depletion.
• Horizon default 60 months. Businesses that never hit cash-out within 60 months are reported as runway-infinite.
• No taxes, distributions, or dividends. For a profitable projection, add a flat tax line to the monthlyBurn input.

5. Data sources

• First Round State of Startups 2023 — burn and runway percentiles by stage.
• SaaS Capital Annual Survey — bootstrapped and capital-efficient SaaS benchmarks.
• US Small Business Administration — manage your finances — cash-flow planning reference.

6. Known limitations

• Compounding-growth optimism past 12 months. A monthly growth rate of 10% compounds to 3.1× in a year and 9.6× in two. Real businesses rarely sustain this — treat long-horizon outputs as best-case only.
• No ramp-and-plateau curve. To model ramp, run the tool twice: months 1–6 with the ramp rate, then start over at month 7 with a lower steady-state rate.
• No fundraising timing. If the plan assumes a Series A closes "in Q3", the tool cannot verify that. Build a pre- and post-round scenario.
• No scenario fan chart. Best/base/worst comparison requires three runs. We intentionally don't bundle Monte Carlo — the inputs aren't stable enough to justify the false precision.
• Non-cash burn (stock-based compensation, deferred payroll) is out of scope. Add it manually to monthlyBurn if material to the decision.

7. Reproducibility

8. Change log

• 2026-04-24methodology page first published.