How Long is Your Startup Runway?

By: Sam Kawtharani

One of the jargon you will often hear as an entrepreneur is runway. In the startup world, runway is how long your company can survive if your income and expenses stay constant.

Unfortunately, most entrepreneurs end up spending a lot of time on runways instead of airports. They find themselves balancing cash flow, which, bluntly speaking, is the amount of time or money they can operate with red on their excel sheet. For example, if a business with no revenue is burning $10,000 per month and has $100,000 in the bank, it has a “runway” of ten months.

Well that was easy, right?

While the concept might seem straightforward, the reality is more complicated. Entrepreneurs must have a clear understanding of a company’s expenses and cash flow in general. Knowing how long your runway is, and how to control your cash flow, is crucial to predict and managing the risks of starting a business.

The most common reason for a startup to hit the end of its cash runway — when checks start to bounce — is poor cash-flow management. In our next blog post, we will explore some tips to managing a startup’s cashflow better.

About the Author: Sam Kawtharani is an experienced FinTech product manager and co-founder of Seedlify, the first Canadian Capital-as-a-Service provider of marketplace revenue based financing for early-stage growth businesses.

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