Gross versus net burn
Gross burn is total cash out per month. Net burn is cash out minus cash in. Both matter: net burn tells you how fast the balance falls, gross burn tells you what the business costs to operate regardless of revenue.
Reporting only net burn hides how much of your survival depends on revenue continuing exactly as forecast.
Runway is not just cash divided by burn
The simple calculation assumes burn is constant. It rarely is. Hiring already committed, an annual insurance renewal, a tax payment, a software contract resetting: all change the figure.
A runway number built from a forward cash forecast rather than a trailing average is materially different, and usually shorter.
What to exclude and what not to
- Exclude genuine one-offs, but label them. A legal settlement is one-off; a recruiter fee during active hiring is not.
- Include taxes. Businesses regularly forget quarterly estimates in burn calculations.
- Include the timing of receivables, not just their existence. Money owed is not money available.
The number that actually matters
Months of runway at current committed spend, assuming no new revenue beyond what is already contracted. That is the pessimistic case, and it is the one that determines how much risk you can take.
Businesses that only model the optimistic case discover the gap at the point where options have already narrowed.
TallyWise provides this as part of our fractional CFO services. Book a call to talk through your situation.
