Cash runway is the single most important number for any pre-profit business — yet many founders calculate it loosely, base it on best-case revenue, and end up with nasty surprises. This guide explains the conservative calculation model VCs use, what 'good' runway looks like in 2026 and the highest-leverage moves to extend it.
Runway (months) = Cash on hand ÷ Net monthly burn. Net burn = monthly costs minus monthly revenue. If you have £200,000 cash and net burn of £25,000/month, you have 8 months runway.
Always use net burn, not gross. Revenue isn't an afterthought — even small revenue meaningfully extends runway. £15k/month revenue against £40k costs = £25k net burn = double the runway of £40k gross burn.
Build two scenarios. Conservative: revenue at 70% of forecast, costs at 110% of plan, no churn changes. Aggressive: revenue at 100%, costs as planned. The conservative case is what you should plan around.
VCs typically subtract 2-3 months from your stated runway when assessing — partly because reality usually undershoots plan, partly because fundraising itself takes 3-6 months. Plan to start raising at 12-9 months runway, not 6.
Pre-Seed: 12-18 months ideally; 6-9 months is dangerous. Seed: 18-24 months — enough to hit Series A milestones with buffer. Series A: 18-24 months — same logic for Series B.
Public companies typically maintain 12-18 months of operating cash. Bootstrapped businesses often run on 3-6 months — sustainable because they have revenue covering most costs and can cut quickly.
Cut headcount: usually the biggest lever. Painful but a 20% headcount reduction can extend runway by 25-40%. Do it once and decisively rather than in repeated rounds — culture damage compounds.
Cut SaaS and contractor spend: most startups have 15-25% of stack genuinely under-used. Audit annually. Renegotiate contracts at renewal — vendors will discount 20-30% to retain you in the current market.
Move to revenue-based financing or invoice factoring: bridges short-term cash without diluting equity, if revenue is predictable.
Burn climbing for 3+ consecutive months without revenue acceleration. Pipeline shrinking quarter-on-quarter. Key customers churning. Hiring continuing despite missed revenue targets — most common founder mistake.
Build a weekly cash dashboard: opening balance, weekly inflows, weekly outflows, closing balance, runway months at current burn. Review every Monday. Anything else and you're flying blind.
Monthly minimum, weekly at <12 months runway, daily at <3 months.
Only drawn balances. Undrawn facilities can disappear in a covenant breach exactly when you need them.
Treat as a once-a-year cash injection, not recurring revenue. Don't bake them into burn calculations.
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