Burn rate, runway and cash flow explained
Cash measures tell you how long the business can keep going before it needs more money. This section explains 10 of them in plain English. Jump to the calculator to try it with your own numbers.
Section 4 of 10
10 terms explained
Burn rate
How fast a startup spends cash, usually per month. Gross burn is all spending; net burn is spending minus the cash coming in.
Runway
How many months the business can run before the cash runs out: cash in the bank divided by net monthly burn, if the burn stays the same.
OCF
Operating cash flow
Cash made or used by the day-to-day business, before investment and financing.
P&L
Profit and loss statement
The statement of revenue, costs and profit or loss over a period. A business can show a profit and still run out of cash, because bills and payments arrive at different times.
BS
Balance sheet
A snapshot on one date of what the company owns (assets), what it owes (liabilities) and the shareholders' equity.
CF
Cash flow
Money moving into and out of the business over a period.
COGS
Cost of goods sold
The direct costs of making your product or delivering your service, such as materials or hosting. Revenue minus COGS is gross profit.
OPEX
Operating expenditure
Day-to-day running costs, such as salaries, rent and software subscriptions.
CAPEX
Capital expenditure
Spending on things the business will use for more than a year, such as equipment.
FTE
Full-time equivalent
A way to count staff by hours worked: two people working half-time make one FTE.
Try it with your numbers
Burn rate and runway calculator
Your costs, cash and growth rates, month by month for up to five years: when the cash runs out, when to start raising, and whether you are default alive. It starts on the example above.
Your runway
10 months
Cash runs out in month 10.
- If raising takes six months, start by month 4.
- Default dead: on these growth rates the cash runs out before revenue covers costs. Faster revenue growth, lower costs or new funding would change that.
- Gross burn
- £20,000
- a month, all costs
- Net burn
- £15,000
- a month, costs less cash in
- Break-even
- Not in 5 years
- Status
- Default dead
Last checked . Estimates only, not financial, tax or legal advice: deal terms vary, so check your documents and take advice before you sign. More terms in the startup glossary.