Burn rate and runway: How to calculate them for a startup

What are gross burn, net burn, and runway?

In this article’s framework, gross burn is total monthly operating cash outflow. Net burn is operating cash outflows minus operating cash inflows; a positive figure indicates cash consumption. New investment or loan proceeds are not operating revenue and should not be used to make net burn look better.

Simple runway equals available cash divided by monthly net burn when net burn is greater than zero. If receipts equal or exceed spending, the formula does not produce a finite cash-exhaustion date under current assumptions. That does not prove the business is safe in every scenario.

Stripe notes that forecasts need to be realistic because their purpose is to support cash-management decisions. Y Combinator also emphasizes knowing your cash and runway before acting. The framework below supports an initial review and does not replace accounting reports or detailed financial planning.

Hypothetical example: Revenue rises, but the buffer remains short

A startup has VND 900 million in available cash. Monthly operating payments are VND 300 million, while actual customer receipts are VND 180 million. Net burn is VND 120 million; simple runway is 900 ÷ 120 = 7.5 months if everything remains unchanged.

If an upcoming one-off payment of VND 150 million is not already included in monthly spending, cash used for the estimate falls to VND 750 million. Runway after reserving that amount is 6.25 months. Check whether the one-off expense is already included in operating outflows to avoid deducting it twice.

If receipts fall 20% to VND 144 million per month, net burn increases to VND 156 million. With VND 750 million remaining, estimated runway is about 4.81 months. These calculations are hypothetical examples, not a forecast for a specific business.

Runway calculator: Try your own figures

Enter amounts in the same unit, millions of VND. The tool first deducts one-off spending not included in monthly outflows, then divides by net burn. Adjust receipts to test a scenario. Calculations run in your browser and are not sent to the server.

The tool assumes the one-off expense occurs immediately and monthly receipts and spending remain constant. For month-by-month changes, use a period-based cash forecast; do not treat this result as an exact cash-exhaustion date.

Identify available cash before calculating

Start with cash the business can use for operations after identifying restricted amounts or funds reserved for obligations that need to be protected. Do not add undrawn credit, fundraising not yet received, inventory, or uncollected revenue to available money. Principal repayments, taxes, equipment investments, and quarterly expenses need to be entered in the correct forecast periods; if they are absent from the calculator’s spending figures, the displayed runway does not reflect all obligations.

If an obligation has already been deducted from available cash, do not deduct it again as a one-off expense in the calculator. For a dated forecast, another approach is to retain the actual balance and enter the obligation on its payment date. The key is a consistent method that neither omits nor double-counts items.

A cash forecast reveals what average division overlooks

A hypothetical scenario: the opening weekly balance is VND 200 million, a payment of VND 220 million is due early in the week, and a customer transfers VND 100 million only at week-end. The closing weekly total may be positive, yet the business still lacks cash when payment is due. Average-based runway does not show this.

A minimum forecast records the opening balance, each expected receipt and its certainty, each payment due, and the closing balance. Closing balance equals opening balance plus receipts minus payments. Where needed, use daily rather than weekly periods.

Track confirmed cash, probable cash, and uncommitted cash separately. Examine delayed customer payments, rising costs, or postponed funding. Do not make the best-case scenario the sole basis for irreversible spending.

When runway shortens, which decisions should you review?

Review uncommitted spending, customer payment terms, receivables, and the speed of converting inventory into cash. When considering cuts, assess the impact on delivery capability, quality, and future revenue. Cutting a cash-generating activity merely because it is easy to cut may worsen the problem.

If expansion requires more cash, ask for a payment schedule, receipt timing, and a downside scenario. A funding round under discussion is not money already available. Founders need to work with accounting and finance owners to verify actual obligations before deciding.

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