How to Calculate Your Real Startup Runway

February 28, 20265 min read

Every runway calculator on the internet uses the same formula: Cash ÷ Monthly Burn = Months. It's simple, intuitive, and wrong.

The formula everyone uses

Bank balance$84,000
÷ Monthly net burn$6,000
Naive runway14 months

14 months feels comfortable. Enough time to grow, hire, experiment. You relax.

What the formula misses

The naive formula uses your bank balance as the starting point. But your bank balance includes money that's already spoken for:

  • Deferred revenue from annual subscriptions — cash you collected but haven't earned
  • Tax reserves — money the IRS expects from your revenue
  • Hidden commitments — the contractor you promised, the annual tool renewal, the planned infrastructure upgrade
  • Next month's costs — payroll, hosting, and tools that are already due

Subtract all of that, and your real starting point isn't $84,000. It's $31,000. Here's where the gap comes from.

The reality-adjusted formula

Bank balance$84,000
− Deferred revenue($21,600)
− Tax reserve($12,000)
− Commitments($8,000)
− Recurring costs (30d)($11,400)
Safe-to-Spend$31,000
÷ Monthly net burn$4,000
Real runway7.8 months

14 months became 7.8. That's not a rounding error. That's the difference between “we have time” and “we need to act now.”

Calculate your own real runway.

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Why “conservative by default” matters

Nett calculates runway assuming zero revenue growth. Not because growth won't happen, but because hope isn't a strategy. Your optimistic brain consistently overestimates revenue velocity and underestimates how long things take.

A conservative runway number gives you the floor. If things go well, you'll have more time. If they don't, you won't be caught off guard.

What this means for your decisions

With 14 months of runway, you might hire two people. With 7.8 months, you hire one — or none. That's not pessimism. That's making a hiring decision with real numbers.

The founders who survive aren't the ones with the most runway. They're the ones who know exactly how much they have.

Related: Your Bank Balance Is Lying to You · Nett vs Your Bank Balance

50%+ of founders operate with less than 1 month of financial runway visibility.

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