Quick answer
A cash runway calculator estimates how many months a business can operate before it runs out of cash, based on its current cash balance and net burn rate. The basic formula is cash divided by monthly net burn, but for a product business the calculation must account for inventory purchases, which distort a simple burn number.
The basic runway formula
At its simplest, runway is straightforward math.
Formula: Runway (months) = Cash on hand / Average monthly net burn. Net burn is cash out minus cash in over a typical month.
Why inventory breaks the simple version
For a consumer brand, a naive burn number is misleading because a large inventory purchase in one month makes burn look catastrophic, while the months you sell that inventory make it look great. Runway has to be calculated on projected cash flow that spreads inventory timing correctly, not a single month's swing.
| Input | Simple calculator | Product-business reality |
|---|---|---|
| Burn rate | Last month's net | Averaged across inventory cycles |
| Inventory | Ignored | Modeled by PO and lead time |
| Revenue timing | Assumed even | By channel and terms |
| Result | Volatile, misleading | A number you can plan on |
Runway is a decision input
- Hiring. Can the runway support the next hire?
- Inventory. Does the next PO fit within the cash you have?
- Fundraising. How many months until you must raise, and on what terms?
Where Drivepoint fits. Drivepoint calculates runway from a live model that includes inventory timing and channel-level revenue, so the number reflects reality rather than a single month's swing.