Every small team has a runway number. Almost none know it. "We're fine, there's money in the bank" is not a number — it's a feeling, and feelings trend downward slowly until they trend downward all at once.
Runway is one division: cash on hand ÷ net monthly burn. The hard part isn't the division. It's computing both numbers honestly and pre-deciding what you'll do at each threshold — while you're calm enough to decide well.
1. Net burn, honestly
Average cash out minus average cash in over the last three months — three, not one; one month is an anecdote. Pull it from your month-end close (if you don't close, your burn is a guess wearing a spreadsheet). Two honesty rules:
- Exclude one-offs on both sides. The annual insurance premium, the one-time enterprise invoice — they inflate and deflate runway alternately and average to noise. List them separately.
- Include the forgotten lines. Processor fees, the FX spread on foreign sales, payroll taxes that lag payroll. If burn "changed" >15% month-over-month with no decision to explain it, you miscounted — find the line first.
2. The three balances
The bank app shows one number; real cash has three:
- Bank balance — the truth, minus anything earmarked (taxes held back, signed deposits).
- Processor in-transit — settled but not landed (1–3 days of sales). Counts, but as its own line so the bank number doesn't swing mysteriously.
- Available credit — counts at 90%, not 100%. Undrawn credit is a decision away from cash, but a decision with interest attached.
What does NOT count: receivables (an invoice is not cash until it is one), processor reserves, and any investment that is "basically done." Runway computed on hope is the number that kills companies, because it feels like safety exactly until it doesn't.
3. Bands with pre-decided actions
- Green (6+ months): invest deliberately; keep the monthly ritual.
- Yellow (3–6): pre-decided moves fire without a meeting — discretionary spend freezes, the price review this quarter, weekly dunning on slow invoices.
- Red (<3): owner-led moves within two weeks, on a schedule: the cost cut list, the runway extension pitch, the founder salary conversation.
The band map is a decision you make once, in green, about what you'll do in red. Teams that skip it don't avoid hard decisions — they just make them scared, later, with fewer options.
4. The lever order: cut, sell, raise
- Cut first — zombie subscriptions, unused seats, renegotiated renewals. Fast but small: $1k/month is $12k/year — real, rarely a rescue.
- Sell second — collect what you already earned (a dunning email to a bounced invoice is the fastest cash that exists), price new work properly, chase the warm pipeline. Slower, bigger.
- Raise last — capital takes months and fails most times it's tried. Starting at red means you've already spent your negotiating position.
Never on the cut list, in any band: taxes and payroll filings (illegal to cut) and load-bearing basics (the $50 security check that prevents the $50,000 day).
5. The twenty-minute ritual
Rides with the month-end close. Five fields on one line: date, cash, in-transit, burn, months. Twelve lines a year is a trend, and trends turn a quiet slide into a visible one. Two honesty checks: if the number has been "about six months" for four straight months, someone is rounding away a decline; and when you cross a band, the action fires that month — "next quarter" is a decision not made. With investors? Same line, unedited. A runway you're ashamed of is a runway you're not managing.
Worked example: 4.2 → 7.8 months in one quarter
A five-person agency runs its first runway line at the March close: cash $118k, in-transit $9k, burn $28k/month — 4.5 months, yellow, barely. The yellow moves fire: sprawl audit kills $610/month of zombie tools; a dunning pass collects $7,400 of emotionally-written-off invoices; new engagements go $95 → $110/hour (existing clients grandfathered to renewal); the co-founder's side-project stack turns out to be $290/month on the company card. June's line: cash $124k, burn $17.5k — 7.8 months, green. Nothing heroic: one audit, one dunning pass, one price review, three spreadsheet lines. The owner's decision-log note: "runway was always this fixable; we just never had the number on a line."
The full checklist — the three-balances table, band actions, lever order, and the worked example — is free on our ops notes site (no signup):
👉 Cash Runway Checklist for Small Teams
The burn numbers come from the month-end close checklist; the cheapest yellow-band revenue lever is the price increase template.
Free checklists and runbooks at hive80-lab.github.io/ops-notes; the paid kit is on Gumroad.
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