Calculating Runway: How Many Months Will Your Business's Money Last?

There's €18,000 sitting in your business account. Is that a lot? Not much? The honest answer: it depends on how fast the money is melting away. That's exactly what runway answers – the number of months your business can keep going on the money it has if not a single euro more comes in.

The term comes from the start-up world, but it's just as useful for solo freelancers, self-employed professionals and small businesses. A contract falls through, a large invoice gets paid three months late, you're out sick – in moments like these, the question "How long will the money last?" becomes very concrete. Better to know the answer in advance.

What runway tells you

The definition in one sentence

Runway is the span of time in months that your business can bridge with the money available before the account hits zero. It links two figures you should both know: your liquid funds and your monthly cash outflow.

Why the account balance alone isn't enough

An account balance is a snapshot. It says nothing about how much leaves the account every month without fail. For someone with €2,000 in monthly costs, €18,000 is a comfortable nine-month cushion. For a small office with two employees and €12,000 in monthly costs, it's barely six weeks of breathing room. Only runway puts the account balance into context.

The formula: how to calculate your runway

The basic formula

Runway (months) = available liquid funds ÷ monthly net cash outflow

The monthly net cash outflow is often called the "burn rate". It describes how much money disappears from the account each month on balance. Two variants are common:

• Gross runway: You calculate as if no income at all were coming in anymore. Liquid funds ÷ total monthly expenses. This is the conservative view, the worst case.
• Net runway: You subtract the income that will realistically keep coming, such as ongoing retainers or maintenance contracts. Liquid funds ÷ (expenses − secure income).

For freelancers, gross runway is usually the more honest number, because income often depends on just a few clients.

What counts as available funds?

Only count money you can genuinely use freely:

• Balances in business accounts
• Instant-access savings or reserve accounts intended for the business
• Cash on hand

Not included:

• Earmarked money, such as reserves for VAT and income tax. Economically, that money is no longer yours.
• Outstanding receivables. An invoice you've issued isn't money in the account yet.
• Your overdraft facility. It's a loan, not an asset. You can look at it separately as a reserve, but you shouldn't mix it into the main calculation.

What goes into the monthly outflow?

Everything that leaves the account regularly:

• Rent, software, insurance, phone, bookkeeping
• Staff costs, if any
• Loan instalments and leasing
• Your owner's salary, i.e. what you need to live on privately
• Pro rata: tax prepayments, contributions, annual invoices

The last point is easily forgotten. If you only add up the monthly direct debits, you underestimate the outflow because quarterly and annual items are missing. Spread them across twelve months.

A note on the tax items: THA·ONE is a planning aid, not tax advice within the meaning of the German Tax Advisory Act (StBerG). Which prepayments and reserves actually apply in your case is best clarified with your tax advisor.

Practical example: a consultant's runway

The following example is entirely made up and serves only to illustrate. Imagine Lena, a self-employed marketing consultant with no employees.

Step 1: Determine available funds

Step 2: Determine monthly outflow

Step 3: Calculate runway

Gross runway: €27,000 ÷ €4,500 = 6 months.

Lena also has a retainer client who reliably pays €1,500 a month. Net runway: €27,000 ÷ (€4,500 − €1,500) = €27,000 ÷ €3,000 = 9 months.

The interpretation: if everything falls away, Lena can hold out for six months. If the retainer stays, it's nine. Both numbers are useful – the first shows the safety net, the second the more likely course of events.

Interpreting runway: what the number tells you

Three zones as a guide

There's no official benchmark. The right runway depends on how quickly you win new work and how much your business fluctuates. As a rough guide for freelancers and small businesses:

• Under 3 months: critical. A single late payment can lead to a shortfall. Act now, don't wait.
• 3 to 6 months: solid, but without much room for surprises. A good time to build up reserves deliberately.
• Over 6 months: comfortable. You can sit out weak phases, negotiate calmly and don't have to take on any job out of fear.

If your revenue is highly seasonal or your projects have long lead times, shift the thresholds upwards.

Runway is not a forecast

Runway describes the status quo on the assumption that everything continues as it is now. It doesn't tell you when the money will actually run out, but how much time you have to take countermeasures. A runway of four months means: you have four months to win new work, cut costs or activate reserves.

A moving number

Don't calculate runway once a year – do it monthly. If costs rise or reserves fall, it shortens – sometimes faster than you'd think. For a first overview, a free liquidity quick check is enough. If you want to keep the number in view permanently, THA·ONE's liquidity tool tracks runway automatically from the 12-month forecast, including best, base and worst-case scenarios (more on this).

Typical mistakes when calculating runway

Counting earmarked money

A classic mistake: treating tax reserves as available. Runway then looks longer than it is, and the next prepayment hits you twice as hard.

Forgetting the owner's salary

If you only count business costs and leave out your private needs, you significantly underestimate the outflow. After all, you still have to pay for housing, food and health insurance.

Only working with averages

Runway assumes an even outflow. In reality, there are months with back payments, annual contributions or purchases. For these cases, a month-by-month liquidity plan in 5 steps is a useful complement to runway.

Extending your runway: your levers

If the number is too low, you essentially have three levers:

1. Reduce outflow: Review subscriptions, question fixed costs, postpone large purchases. With a €4,500 monthly outflow, saving €300 already extends the runway in the example above from 6.0 to 6.4 months.
2. Increase available funds: Chase outstanding invoices consistently, agree shorter payment terms, ask for deposits on larger projects.
3. Build secure income: Retainers, maintenance contracts or recurring services narrow the gap between expenses and income and improve net runway.

A target runway is also a good anchor for the question of how big your business emergency fund should be: multiply your monthly outflow by the number of months you want to cover.

Conclusion

Runway translates your account balance into a time span – and that's the unit you actually make decisions in. The formula is simple: available funds divided by monthly outflow. What matters is that you calculate honestly: take out earmarked money, include the owner's salary, account for annual items pro rata.

Recalculate the number once a month. If it's above six months, you have the calm you need for good decisions. If it's below three, you know now is the right time to pull the levers – not once the account is empty.