Runway Modeling 101: How to Know Exactly How Long Your Cash Will Last

Ask a founder how much runway they have and you usually get one number: cash divided by last month's burn. That number is almost always wrong, and the ways it is wrong are the ways startups die. A real runway model is a small set of scenarios, refreshed monthly, that tells you what happens before you commit to it.

The inputs that matter

• Committed cash outflows — payroll (with taxes and benefits), rent, contracted software and vendors. These are facts, not estimates.
• Variable spend — marketing, contractors, travel. Model these as levers you can pull, because they are.
• Revenue with collection timing — booked revenue is not cash. A $120K annual contract paid quarterly behaves completely differently from one paid up front.
• One-time events — tax payments, annual insurance, deposits. These are the spikes that surprise naive models.

Three scenarios, always

1. Base case — current team, current growth. This is your default number.
2. Downside case — top customer churns, sales cycle stretches 50%, growth halves. If runway in this case is under 9 months, act now, not later.
3. Decision case — the specific thing you are contemplating: two engineers, a price increase, a new office. The model exists to price decisions before you make them.

A runway model is not a spreadsheet about the future. It is a machine for pricing today's decisions.

The four mistakes that sink founders

1. Using average burn. Last quarter's average hides the two hires who started last month. Model forward commitments, not backward averages.
2. Counting booked revenue as cash. Collections lag. Model cash-in by payment date.
3. Ignoring payroll taxes and benefits. A $120K hire costs $140K+ fully loaded.
4. Refreshing it quarterly. A model refreshed quarterly is a history document. Refresh monthly, from a close that finishes on time.

This is exactly the cadence a fractional CFO runs: model refreshed with every close, scenarios re-priced before every major decision, and a number you can say out loud to your board without flinching.