Build a runway plan that survives a difficult month

Start with cash you can actually use

This fictional example follows a founder deciding whether to hire while collections are slowing. It is a planning exercise, not a universal reserve recommendation. Gather the bank balance, cash receipts, operating payments, committed bills, and the cash you need to protect before opening a calculator.

Assume the company has $180,000 of unrestricted cash. The founder sets aside $30,000 for obligations and a buffer, leaving $150,000 available to fund the plan. Normal monthly operating cash payments are $32,000 and customer cash receipts are $20,000. Exclude an unsigned investment commitment from available cash: money expected from a funding round cannot pay today’s payroll.

Use receipts and payments from the same period. An invoice marked as revenue in an accounting system may still be unpaid. A quarterly tax bill may not appear in an ordinary month. List those timing differences separately so a smooth average does not hide a cash shortage.

Compare three versions of the same plan

In the Burn Rate Calculator, monthly gross burn is $32,000 and net burn is $12,000. Enter the same cash, payments, receipts, and reserve in the Startup Runway Calculator. The steady-state runway to the reserve is ($180,000 − $30,000) ÷ $12,000 = 12.5 months.

The lower-receipts case assumes a sustained $5,000 monthly shortfall. The hiring case assumes an additional $6,000 of monthly cash cost and no immediate revenue benefit. Neither is a forecast. They isolate the effect of changing one assumption. If both happen, monthly net burn becomes $23,000 and runway to the reserve falls to about 6.52 months.

A delayed payment is different from permanently lower revenue

Suppose instead that $10,000 due in month one arrives in month two. At the base burn rate, cash closes month one at $158,000 rather than $168,000. If the delayed amount is fully collected in month two, cash closes that month at $156,000, the same as the original base plan. The temporary low point still matters even though the two-month total catches up.

Now add a $24,000 annual software renewal due in month three. With no other changes, month-three closing cash falls from $144,000 to $120,000. A constant-burn calculator cannot place that renewal on a calendar. Put dated commitments into a separate cash schedule; do not spread the payment across twelve months when deciding whether cash will be available on its due date.

Turn the estimate into a decision rule

For this example, the founder chooses a review trigger when the downside plan shows fewer than nine months to the reserve. This is the founder’s illustrative operating rule, not an industry standard. Both the lower-receipts and immediate-hire cases breach it. The next task is to validate collections and the hiring start date, rather than treating 12.5 months as permission to spend.

Deferring the hire for two months preserves $12,000 during that period, assuming no other cost changes. That does not eliminate the recurring commitment once the person starts. Likewise, a $3,000 monthly expense reduction extends the base steady-state runway to roughly 16.67 months, but only if the saving is immediate and does not reduce receipts.

Keep a repeatable monthly review

• Reconcile opening cash plus actual receipts minus actual payments to closing cash. Investigate the difference before updating the model.
• Record overdue invoices and the expected collection dates separately from new sales.
• List payroll, taxes, renewals, debt payments, and other dated commitments for the next three months.
• Update base and downside assumptions, the reserve, and the reason each changed.
• Write down the action, owner, and next review date when a decision trigger is reached.

Save each review locally in your own notes or spreadsheet; this site does not save your planning history. Compare the previous estimate with actual cash. That comparison is more informative than making the current runway number look reassuring.