Burn rate measures how quickly a company uses cash. Net burn is cash outflows minus cash inflows during a period; gross burn considers operating cash expenses before revenue.
Runway formula
Runway in months = cash balance / monthly net burn. A startup with 100,000 monthly net burn has about nine months of runway if both remain constant.
What changes runway
Hiring, collections, annual contracts, debt payments, capital expenditure, seasonality, and one-off costs can materially change the forecast. Use a rolling cash model instead of relying on one historical month.
Limitations
Runway is a scenario, not a deadline. It does not guarantee financing availability or include future commitments unless they are in the forecast.