THE SHORT ANSWER
Gross burn is monthly operating cash outflow. Net burn is cash outflow minus cash inflow for the same period. When net burn is positive, simple runway equals available cash divided by monthly net burn. Forecast cash timing and changing expenses separately because the simple formula assumes the current pattern continues.
Separate cash, expenses and burn
| Term | Meaning |
|---|---|
| Cash balance | Cash currently available under the planning boundary |
| Gross burn | Operating cash outflow during the period |
| Cash inflow | Cash received during the same period |
| Net burn | Cash outflow minus cash inflow |
| Runway | Cash balance ÷ positive net burn |
Work a simple scenario
An illustrative startup has ₹12,00,000 in available cash, ₹3,00,000 of monthly operating outflow and ₹1,50,000 of monthly cash inflow. Net burn is ₹1,50,000, producing a simple eight-month runway.
That estimate changes if collections are delayed, annual payments fall in one month, hiring changes expenses or revenue moves. A cash-flow forecast preserves timing that an average removes.
Evidence & context: UK Department for Business and Trade
Handle zero or negative net burn explicitly
When cash inflow equals or exceeds operating outflow, the simple formula does not produce a finite runway. That does not mean unlimited survival: revenue concentration, future expenses, taxes, working capital and one-off obligations may still matter.
Use the Startup Runway & Burn Rate Calculator to calculate the arithmetic and review its assumptions.
Respond with more than fundraising
- Improve cash collection or payment timing.
- Reduce or defer costs that do not protect learning or delivery.
- Narrow the customer or product scope.
- Test price, packaging or a revenue-bearing service.
- Change hiring or commitment timing.
- Consider founder capital, revenue, debt, grants or equity where suitable.
Sources & further reading
- Preparing for funding applications
UK Department for Business and Trade. Government guidance on cash-flow forecasting and funding preparation. It supplies planning principles, not jurisdiction-specific financial advice for every startup.
- Break-even point
U.S. Small Business Administration. Official guidance on contribution margin and break-even estimates. The single-product formula is a planning model and should not be treated as a complete accounting forecast.
Examples and exercises are illustrative unless attributed to a source. No independent expert review is claimed.
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