O'Reilly logo

The Agile Startup: Quick and Dirty Lessons Every Entrepreneur Should Know by Matt Richter-Sand, Jeff Scheinrock

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

How Much Runway?

image

One financial number that you should always have in the back of your mind is how much runway you have left. At your current cash burn rate, how many months can you survive before you run out of money? Shoot for 18 to 24 months of runway at all times so you can focus on your business without worrying too much about money.

Calculate the runway left by dividing the money in the bank by your loss at the end of the money. For instance, suppose you are losing $10,000 per month, and you have $100,000 left in the bank. You have 10 months of runway left ($100,000/$10,000 per month = 10 months).

There are three things you can do to lengthen your runway: generate more revenue, lower your expenses, or raise more capital. If you increase your revenue and lower your costs, resulting in a $2,500 loss per month, then you’ve just increased your runway to 40 months ($100,000/$2,500 = 40 months).

Undercapitalization is the number one reason small businesses fail, so make sure that you always have enough runway to get your startup’s wheels off the ground.

icon

Previous | Chapter Contents | Next

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required