Runway math that founders can communicate

People try to explain ten numbers when three would do. The team hears jargon. The board hears optimism. Finance hears a migraine coming on. The goal isn’t to become an analyst. The goal is to say what we have, how fast we’re burning it, what changes the slope, and when we’ll be safe.

Let’s start with the simplest definition on earth. Runway is cash divided by net burn. Cash means the money you can actually use (bank balance minus restricted cash). Net burn is cash out minus cash in, not GAAP losses, not accrual wizardry. If we spend $1.2M a month and collect $600k a month, net burn is $600k. With $6M usable, runway is ten months. That’s it. You can do that math in your head, and you should in every leadership meeting.

From there, I keep a tiny “runway stack” everyone can remember:

• Cash today. The number on the bank statement.

• Net burn trend. Trailing three months, not just last month.

• Breakers and builders. One or two levers that break the plan (hiring too fast, collections slipping) and one or two that build it (price, gross margin, CAC payback).

Yes, there are more details. But if a sales lead, a PM, or an engineer can recite those three items, your culture just got safer.

Now for the part founders hate but investors love: time to raise. Fundraising takes longer than you think. Even if you’re a rocket, build a buffer. I assume six months from first serious meeting to money in. If your runway is ten months, you do not have ten months. You have four before you must be “choice-ready.” That detail changes behavior. Marketing tests get sharper. Hiring slows. Collections get attention. Not because we’re scared—because the calendar is real.

So what are the actual numbers worth saying out loud, repeatedly, without slides?

1. Cash, net burn, months left (headline)

Usable cash is $6.4M. Net burn averages $590k over the last quarter. We have ten-plus months on the headline, but four months until we need to look fundable.

2. Run-rate gross margin and why it moves

Gross margin is 63% and nudging up as we shift workload off the expensive path. Every ten points of margin adds roughly one more month of runway at this burn.

3. CAC payback and pipeline reality

“Blended CAC payback is nine months on self-serve, twelve months on sales-assisted. If payback slips, burn spikes. If we improve by two months through pricing and onboarding, we gain hidden runway without cutting.”

Those three sentences travel well. They also cover most of what the board will ask in the first five minutes. Notice what’s missing: unicorn adjectives.

Next, I talk about working capital, because runway lives or dies there. We celebrate bookings; cash cares about collections. If invoices go out on the 30th and get paid on day 58, that is your burn talking. I set one non-negotiable: “Invoice at delivery, collect at 30, escalate at 31.” When you tightened collections by two weeks, you effectively add almost a month of runway with zero layoffs and no magic. Same revenue. Faster cash.

On the expense side, I split costs into three buckets I can explain to a stranger on a plane:

• Keep lights on: cloud, rent, core tools. Negotiate, but don’t break production.

• Drive revenue next quarter: reps, ads with proven CAC, onboarding capacity. If it pays back inside a year, it usually stays.

• Nice but noisy: projects without a payback window, vanity software, pilot creep. Freeze, kill, or stage.

I don’t show a 300-line budget in all-hands. I show three rectangles and the dollar share of each. People get it. And they help.

Founders also need a one-slide scenario view that anyone can repeat. I run three:

• Base: current burn, conservative growth, runway = ten months.

• Focus: price enforcement, two-month CAC payback improvement, collections at 35 days, hiring staged to milestones → runway = thirteen months, ARR up slightly less than Base but safer.

• Push: add sales capacity now, higher paid media, faster ARR growth, CAC payback stretches → runway = eight months unless margin work lands on time.

No fifty-row table. Just levers, effects, and dates. Then I pick one and say why. “We’re choosing Focus because it buys time without stalling growth; we revisit at quarter-close.”

Now, how do you explain burn multiple in plain English? Investors care, and you can’t hide from it. My line: “For every $1 of net new ARR, how many dollars did we burn?” If the answer is over two for too long, growth is expensive. If it’s under one, you’re in rare air. We track it, we explain swings (“hired quota before pipeline, paid media mix wrong”), and we put a date on when it normalizes. That turns a scary metric into a plan.

Headcount deserves its own paragraph, because it’s where runway goes to live or die. I don’t say “we froze hiring.” I say, “We hire only into roles tied to near-term payback or mission-critical stability. Each req has a one-line payback or risk statement on the approval doc.” People stop guessing. Managers start writing sharper business cases. Finance stops being the villain.

Let’s hit pricing. Many founders try to fix runway by cutting. Sometimes you should start by charging correctly. A five percent price move with clear value stories can add more runway than a painful reduction in force. I ask for one change per quarter that increases either realized price (discount discipline, packaging) or attachment (add-ons). Then we measure the impact in dollars, not vibes.

What about marketing? If a channel can’t show path-to-payback under twelve months, it pauses. If a channel does, we keep it and apply offer/angle testing, not random creatives. My team is sick of hearing it, but the rule holds: “Proof stays, hope pauses.” Runway extends when hope gets cheaper.

Here’s the script I use with my team when the topic is tense:

“We’ve got $6.4M of usable cash. Net burn is $590k per month, trending down. That’s a headline ten-and-a-bit months of runway, but fundraising eats six, so we act like we have four to look fundable. We’re choosing the Focus plan: tighten collections to 35 days, push margin to 66% by moving more load off the pricey path, and improve CAC payback by two months through onboarding changes and stricter discounting. That adds roughly three months of runway without freezing the product roadmap. Hiring continues only where payback is under a year or the system breaks without it. We’ll review this plan at quarter-close with BvA variance and cohort retention.”

Everybody breathes. People ask good questions: What if the onboarding change slips? What if discounting fights close rates? We note each risk and the counter. Leadership becomes boring in the best way.

BvA (Budget vs Actual) is the last habit I’ll push. Every month, one page. We print the three numbers that matter (cash, net burn, months left) and the three drivers that moved them (margin, CAC payback, collections). We write one paragraph on why. “Cloud spend down 8% after storage tiering.” “Discount rate down two points; win rate flat.” “DSO improved by eleven days after new dunning.” That page builds trust. The board stops asking for novels. The team stops guessing. The culture starts telling the truth faster.

If you’re still with me, here’s your runway checklist you can read out loud without looking at slides:

• Usable cash today and average net burn over the last three months.

• Months left on the headline and the “decision runway” after subtracting fundraising time.

• The two levers improving runway (usually margin and collections) and the two that can break it (usually hiring pace and CAC slip).

• One-slide scenarios with the chosen plan and a date to revisit.

• Monthly BvA, one page, written in human.

You don’t need a spreadsheet degree to run a company. You need a small set of numbers everyone can remember, the discipline to repeat them, and the courage to act when they drift. Runway math isn’t about fear. It’s about making time—time to fix pricing, time to improve onboarding, time to raise properly instead of desperately.

Say it plainly. Say it often. Then make the graph obey the words.