What is Runway?

Runway is a metric showing 'how many months can you continue operations with current cash on hand.' Originally a startup term, it's also applicable to freelancers and sole proprietors.

The calculation is simple: 'cash on hand ÷ monthly expenses.' For example, with $10,000 cash and $3,000 monthly expenses, your runway is about 3.3 months.

Runway Guidelines

Generally, these benchmarks are helpful:

【Under 1 month】Danger May affect this month's payments. Urgent action needed.

【1-2 months】Caution Payment delays could cause problems. Not comfortable.

【2-3 months】Reasonably safe General safety zone. Can handle some unexpected expenses.

【3+ months】Comfortable Can focus on business with peace of mind.

Appropriate levels vary by industry and seasonality, but aim for at least 2 months.

What Happens with Short Runway?

Prolonged short runway causes various problems:

  • Payment delays immediately threaten obligations
  • Forced to accept low-paying work
  • Cannot invest or upgrade equipment
  • Stress impairs judgment

Being consumed by 'immediate cash flow' leaves no room to grow the business. Short-term funding is necessary, but fundamental runway extension is also important.

How to Extend Runway

To extend runway, there are three approaches: 'increase income,' 'reduce expenses,' and 'increase cash on hand.'

【Increase income】 • Negotiate higher rates • Acquire new clients • Shorten payment cycles

【Reduce expenses】 • Review fixed costs • Cancel unnecessary services • Reduce procurement costs

【Increase cash on hand】 • Retain profits (don't spend) • Use working capital loans • Convert receivables with factoring

Start with what you can do immediately.

Regular Checking is Key

Runway constantly changes. It grows with more sales and shrinks with large expenses.

Build a habit of checking 'what's my runway now' monthly. Understanding your situation in numbers lets you take necessary measures early.

Our simulator shows 6-month cash flow projections and monthly runway (comfort level).

Summary

Runway shows 'how many months you can last.' Maintaining at least 2 months, preferably 3+, gives you mental and business breathing room.

Check your current runway with our simulator and use it for financial planning.