Sometimes, the truth can bite and calculating your business’s runway can be one of those times when it can hurt. Runway is the amount of time you have before your business will run out of cash if current income and expenses stay the same. As a formula, this is calculated by dividing current cash position by the monthly burn rate.
For example…
Corey’s Ice Cream on an Island was a cool concept name. He set up an ice cream shop on a small island off his local beach. Kids could swim up to it and buy ice cream! His cash position was positive on twenty thousand dollars, but his burn rate was five thousand dollars a month. If these figures remained constant, Corey knew that his runway would be four months, the time when he would run out of cash.
