Cash burn and runway: calculate cash consumption
Cash burn and runway: define the flows, verify the calculation and test the hypotheses. Fictitious example and limits of the ratio to prepare your decisions.
Co-founder and CFO
Contents
The cash burn describes cash burn over a period. The runway estimates how long the available cash would cover a positive net burn assumed to be constant. This ratio is an indicator, not a certain date of termination nor a promise of financing.
One Fractional CFO can reconcile data and build scenarios with your team. To distinguish between cash receipts, investments and financing, start with the cash flow.
Calculate your burn rate: define the retained flows
Definition of work to be documented: gross burn corresponds to expenses paid over the period; the net burn subtracts the retained activity receipts. Investments, debts and financing must remain identifiable so as not to confuse operating consumption and variation in the bank balance.
Net burn for the period = paid expenses retained − activity receipts retained- Specify the accounts, period and categories used.
- Use the payments and receipts actually made, without assimilating MRR, invoices or accounting income for cash collected.
- Distinguish between exceptional and seasonal flows: an isolated month does not necessarily summarize future consumption.
- Reconcile the result with banking variations by explaining the investments and financing excluded from the calculation.
Fictional educational example: one month of activity
These amounts are hypotheses invented to explain the calculation. They do not describe an Iter mission nor a standard level of expenditure or social charges.
| Post | Amount |
|---|---|
| Salaries and charges paid | 97 875 € |
| Rent and charges | 4 500 € |
| Tools and software | 3 200 € |
| Marketing | 12 000 € |
| External services | 5 800 € |
| Overhead | 2 500 € |
| Total paid expenses retained | 125 875 € |
| Retained activity receipts | 45 000 € |
| Burn net | 80 875 € |
Calculation: 125,875 − 45,000 = €80,875 consumed over the month. Investments and new financing are assumed to be absent in this example; otherwise, they should be treated separately.
Calculate your runway and know its limits
Estimated runway in months = available cash flow / positive monthly net burnWith €650,000 available and a supposedly constant burn of €80,875 per month, the ratio is approximately 8.04 months. This extension of the fictitious example assumes the absence of new financing, exceptional investment and change in the pace of flows.
If the net burn is zero or negative, this formula does not provide a relevant exhaustion horizon. Cash that is contractually unavailable should not be confused with usable cash. Even with a positive runway, a concentrated deadline can create tension before the mid-term horizon.
Read the horizon according to your context
There is no universal threshold here requiring lifting at nine, twelve or eighteen months. Examine the timing of expenses incurred, seasonality, reliability of expected sales and the time frame specific to the planned financing approaches.
| Location | Question to be answered |
|---|---|
| Uncertain collections | What balance remains available if the customer pays later? |
| Recruitments or investment | What expenses have already been incurred and what options remain reversible? |
| Funding under discussion | What scenario remains viable if the financing does not arrive on the planned date? |
Prepare financing without taking it for granted
The plan distinguishes between available funds, confirmed financing and approaches still under discussion. The date, amount and conditions of an exercise are not guaranteed. The runway does not allow a valuation discount to be mechanically deducted. Our fundraising support helps prepare scenarios and file data. To organize the steps, see the guide to preparing a lift and the points to examine in a term sheet with your advice.
Anticipate with a forecast
Link recruitment, expenses, investments and revenue assumptions to the cash schedule. Compare a central scenario to variants relevant to your business: delayed revenue, lower growth or delayed project launch.
The 13-week cash flow forecast allows you to examine the dates of upcoming deadlines. The Fractional CFO for startups and SaaS links the scenarios to the budget and investor reporting. For a long R&D activity, the deep tech financial management distinguishes milestones and confirmed aid from requested funding.
Examine options and their effects
A recruitment freeze, a change in commercial expenses or a renegotiation does not produce the same effect in all companies. Check contractual commitments, implementation deadlines and business consequences before modifying the plan.
- Document the expenses incurred and the savings still possible.
- Linking business decisions to margins and collections.
- Monitor the deviations from the actual results and assign the updating of the hypotheses.
- Review costs and terms of financing options with relevant councils.
For the presentation framework of cash movements, the official presentation of IAS 7 by the IFRS Foundation distinguishes between operation, investment and financing. It does not define a runway threshold or a fundraising rule applicable to all startups. Source consulted October 2, 2026; This guide is educational and does not replace an analysis of your situation.
