Startup Runway Calculation: A UK Founder's Guide
Your runway is the number of months you can keep operating before the cash runs out. To calculate it, divide the cash in your bank by your monthly net burn, which is cash going out minus cash coming in. If you hold £240,000 and lose £20,000 a month net, you have 12 months. The sum is easy. Getting honest inputs is the hard part, and that is what this guide covers.
TL;DR
Runway (months) = current cash balance ÷ monthly net burn.
Net burn is total monthly cash outgoings minus cash actually received, not invoiced or forecast revenue.
Include tax bills, payroll costs and equipment spend, and count only funding that is committed.
Stress-test the result with a cautious scenario and recalculate every month.
Plan fundraising while you still have roughly 9 to 12 months left, not 3.
Table of Contents
The runway formula
The calculation has two inputs:
Runway = cash balance ÷ monthly net burn
The cash balance is what is in your business accounts today, not what you expect after next month’s invoices clear. Net burn is the amount your cash balance falls by in a typical month.
Gross burn versus net burn
Gross burn is everything you spend in a month: salaries, rent, software, contractors, professional fees, tax payments. Net burn is gross burn minus the cash you receive from customers in that month.
The distinction matters because the two give very different answers. A company spending £30,000 a month with £10,000 of cash receipts has a gross burn of £30,000 and a net burn of £20,000. Use net burn for runway. Use gross burn to see how fast you would run out if revenue stopped altogether, which is a useful worst case.
A worked example
Item | Monthly figure |
Salaries and employer costs | £18,000 |
Rent and software | £5,000 |
Contractors and marketing | £5,000 |
Accountancy, insurance, other | £2,000 |
Gross burn | £30,000 |
Cash received from customers | £10,000 |
Net burn | £20,000 |
With £240,000 in the bank, runway is £240,000 ÷ £20,000 = 12 months. That is the headline figure. It is not yet the figure to plan around.
Which figures to include
Most runway errors come from leaving things out, not from the division. GOV.UK’s guidance on financial model essentials says the cost base should cover fixed costs such as salaries and rent, variable costs that grow with activity, and capital costs like equipment, all of which are cash outgoings.
For a UK startup that usually means checking you have captured:
Payroll in full, including employer National Insurance, pension contributions and PAYE paid to HMRC, not just gross salaries.
VAT and corporation tax payments, which arrive as lumpy outflows. The British Business Bank advises that a cash-flow forecast should list outgoings such as tax bills and record income when clients are expected to pay or bank payments clear.
Annual and quarterly costs spread across the months they actually hit your account: insurance, software licences, accountancy fees.
Equipment and one-off purchases you have already planned.
Cash timing. GOV.UK flags that ignoring payment lags and supplier terms is a common error that causes cash shortages even when the business looks profitable on paper.
On the income side, count only money that is committed. A signed grant offer or an investment with a term sheet agreed and funds due is reasonable to include. A round you hope to close is not. If grants are part of your plan, a tool that helps you find and apply for public grants and tenders can widen the pool, but each award only goes into the runway figure once it is confirmed.
A tidy set of books makes all of this far quicker. If yours are behind, our startup bookkeeping checklist shows what to have in place, and our guide to accounting for pre-revenue startups covers the case where net burn is simply your gross burn.
When income or costs vary
The simple formula assumes a steady month. Most startups do not have one. Three adjustments make the number more reliable.
Use an average, then a trend. Take the average net burn over the last three months to smooth out one-off spikes. If burn is clearly rising because you are hiring, use your planned burn for the coming months instead of the historic average, and work out runway month by month rather than with one division.
Forecast when cash lands, not when you invoice. For B2B companies, sales cycles are a major driver. HSBC Innovation Banking notes that enterprise deals can take 12 months or longer to close, against 3 to 6 months for smaller customers. Add your customers’ real payment terms on top of that, and a deal you expect in March may not fund you until June.
Run scenarios. One published rule of thumb is to plan on 70% of projected revenue and 110% of planned costs. Applied to our example:
Scenario | Receipts | Costs | Net burn | Runway on £240,000 |
Base case | £10,000 | £30,000 | £20,000 | 12 months |
Cautious case | £7,000 | £33,000 | £26,000 | about 9.2 months |
The three-month gap between those rows is the real message. Plan hiring and fundraising around the cautious figure and treat the base case as the upside.
What the number tells you, and when to use a forecast
Runway is a single-number health check. It answers “how long, at this rate?” It does not tell you which month cash gets tight, whether a VAT bill will land before a big customer pays, or how a new hire changes things. For that you need a full cash-flow forecast. Our guide to operational cash flow forecasting walks through the method, and working capital management covers the levers that free up cash without raising money.
A practical rule: use the runway figure for quick monthly monitoring and board updates, and a month-by-month forecast for any decision that moves cash, such as hiring, a lease or a funding round.
Using runway to time fundraising
Fundraising takes longer than most founders expect. One UK guide suggests allowing 3 to 6 months and starting when you have 9 to 12 months of runway left. The same source observes that investors often take 2 to 3 months off a founder’s stated runway, assuming reality undershoots the plan. In our example, a stated 12 months may be read as 9 or 10.
Credibility matters too. GOV.UK notes that investors compare your historic performance with your forecasts, and consistently overestimating growth will lead them to discount your future projections.
If equity is not the right route, the British Business Bank explains that venture debt is designed to add roughly 3 to 6 months of runway to reach the next milestone without further dilution. Lenders focus on your ability to raise future equity, so it suits growth companies with credible investor backing rather than every startup.
Efficiency counts as well as time. HSBC Innovation Banking describes the burn multiple, cash spent per unit of new revenue, as a key investor metric, with 1x or below seen as the gold standard.
Our perspective
Founders usually come to us with a runway number from a spreadsheet and a feeling that it is wrong. It nearly always is, for the same reasons: the bank balance is out of date, VAT and PAYE are missing, and revenue is counted when invoiced rather than when paid. We think runway should be a by-product of good books, not a separate exercise. When bookkeeping is current and reconciled each month, net burn is a figure you read off, and you can spend your time on scenarios instead of fixing data. That is why we combine modern digital tools with the judgement of accountants who have worked in top firms in the UK and the Middle East. The software keeps the numbers live. The people tell you what they mean for your next hire, your next VAT quarter and your next raise. Shoaib
Keep your runway figure accurate with Keystone
We provide day-to-day bookkeeping, VAT filing, payroll, tax planning and year-end reporting for UK founders and growing businesses, so your cash position and burn are up to date when you need them. Our flexible accounting services are published at £99 to £199 per month and scale as your business grows.
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See how our accounting services for founders work and which package fits your stage. If you are unsure which services you need, our overview of types of accounting services for founders is a good starting point.
FAQ
How do I calculate runway for a startup?
Divide your current cash balance by your monthly net burn. Net burn is your total monthly cash spending minus the cash you actually receive. With £120,000 in the bank and a net burn of £15,000, your runway is 8 months.
How often should I recalculate runway?
Recalculate monthly, as soon as your books are reconciled for the previous month. Recalculate immediately after any big change, such as a hire, a lost customer, a funding close or a large tax payment. Fast-moving companies often review it more often.
Should I include money I expect from investors?
No. Count only funding that is committed and due. Keep a separate line showing runway if a round closes, so you can see both outcomes without mixing hope into the base figure.
What is a healthy runway for a UK startup?
There is no universal number. A common guide is to begin fundraising with around 9 to 12 months left, because raising can take several months. If your cautious scenario falls below that, act on costs or funding sooner.
Sources
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