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Calculate simple SaaS runway by dividing available cash by monthly net burn: runway in months = available cash ÷ monthly net burn. That quotient is a useful first check, not a dependable cash-out date when revenue, collections, or spending are changing. Use a month-by-month cash forecast to see when funds could fall below the operating buffer you need, then work backward from the milestone you intend to reach and the time a raise may take.
What SaaS runway measures
Runway estimates how long a company can fund operations from cash it can actually use. For the simple calculation, available cash is the starting balance after excluding restricted or earmarked funds and cash needed for known obligations. Net burn is operating cash outflows minus operating cash inflows for a month. Do not count financing proceeds as ordinary operating inflows.
Gross burn is total operating cash outflows before subtracting operating receipts. Net burn describes the cash draw after receipts; gross burn shows the cost base if receipts weaken. A pre-revenue company may have similar gross and net burn, while the measures diverge as customer cash comes in. Mercury states the net-burn formula as “Net burn rate = Total monthly cash outflows − Total monthly cash inflows.” Mercury’s burn-rate guide explains the distinction.
Calculate a first-pass runway estimate
- Reconcile the cash balance to bank and cash records. Remove funds that are restricted, committed to a specific purpose, or needed for known obligations.
- For each of at least the last three months, total operating cash outflows and operating cash inflows. Keep financing proceeds out of operating inflows.
- Calculate gross burn and net burn for each month. Compare the latest month with the earlier months and note unusual payments, refunds, annual subscriptions, or delayed customer collections.
- Choose a representative monthly net burn, divide available cash by that figure, and label the result as a steady-burn estimate.
For example, $300,000 of available cash divided by $50,000 of monthly net burn equals six months of simple runway. This is arithmetic, not an industry benchmark, and assumes the burn stays constant. CRV gives another arithmetic illustration: $600,000 of cash divided by $75,000 of monthly net burn equals eight months, under the same steady-burn assumption. CRV’s runway guide discusses that example.
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If monthly net burn is zero or negative, dividing cash by net burn does not produce a meaningful finite runway estimate. Use a cash-flow forecast instead: the timing of receipts and obligations still matters even when recent operations are not consuming cash overall.
Choose a burn figure without hiding the trend
A trailing three-month average can reduce distortion from a lumpy invoice or a late collection. Recalculate it monthly and compare it with the latest month: an average can conceal accelerating burn just as easily as it can smooth a one-off event. If burn is increasing, give recent months more weight and explain material one-time cash events rather than letting them silently set the planning number. CRV recommends recomputing the trailing average monthly; Mercury also recommends reviewing burn monthly.
Annual SaaS prepayments, annual software subscriptions, refunds, and irregular vendor or tax payments can make one month unlike the next. Do not simply remove a real cash payment because it is unusual: identify whether it is genuinely one-time, recurring annually, or likely to change. The goal is to distinguish the observed cash pattern from the forward plan, not to make burn look smoother.
Build a month-by-month cash forecast
For a growing or changing SaaS business, project the cash balance month by month instead of extending one burn number indefinitely. A spreadsheet or cash-flow forecasting tool can help, provided its assumptions are explicit and refreshed from company records.
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- Receipts: forecast customer cash collections, not just booked revenue. Reflect expected collection dates, renewal timing, annual prepayments, and slower-payment risk.
- Operating costs: include payroll and planned hires, marketing, infrastructure, contractors, and other expected spending.
- Other cash commitments: include debt payments, taxes, refunds, and contractual obligations when due.
- Cash floor: show the month the balance could fall below a minimum operating buffer, as well as the modeled zero-cash month.
Prepare at least a base case and a downside case. In the downside case, test slower growth or collections alongside expenses that arrive sooner or exceed plan. Mercury recommends a rolling 13-week cash projection updated weekly for near-term visibility; that short-term view complements rather than replaces the longer monthly forecast. Mercury’s guide covers both review rhythms, while Runway Forecaster’s calculation guide discusses cash availability and scenario considerations.
Estimate when to start fundraising
Fundraising guidance is a planning range, not a guarantee about how long a particular company’s round will take. Mercury, in guidance updated July 29, 2026, advises beginning preparation when runway falls below 9–12 months. CRV, writing on August 18, 2026, recommends opening a round with 12–18 months remaining and budgeting 3–6 months for the raise. These recommendations differ because stage, traction, market conditions, geography, investor process, and whether outreach is already underway affect the buffer a company needs. See Mercury and CRV for their respective guidance.
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Set a trigger that leaves time to prepare materials, conduct outreach, negotiate, and close before cash approaches the operating floor. Work backward from the projected month below that floor, allowing for the anticipated fundraising period and a contingency for delay. CRV’s 18–24 months of post-close runway is its current recommendation tied to a milestone, not a universal requirement.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Size the raise around a milestone
Start with the result the company needs to reach: for example, a defined product, revenue, or efficiency milestone that could support another financing or a path toward profitability. Then use the forecast to estimate the capital required to fund operations to that milestone. Add the expected fundraising period and a reasonable delay buffer, and subtract cash expected to remain available. The amount should follow from the plan and its assumptions, not from a fixed number of runway months. CRV and StartWise both discuss relating cash needs to milestones and the raise calendar: CRV and StartWise.
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1Repair Windows errors before they cause bigger problems2Scan for outdated or missing drivers - takes under a minute3Clear out junk files and repair common Windows errorsTest whether the plan depends on a raise
Paul Graham’s “default alive” test asks whether a startup would reach profitability with expenses held constant and recent revenue growth continuing. It is a simplifying test, not a substitute for a detailed forecast. If the company does not reach profitability on those assumptions, the current plan depends on raising capital or changing its spending or growth trajectory. Make that dependency explicit when comparing a raise with hiring changes, cost reductions, or a revised growth plan. Graham’s essay describes the test.
Compare the options by their consequences: projected cash-floor month, milestone timing, operating impact, and exposure if a raise is delayed or unsuccessful. A raise is not the only way to extend runway, but cutting costs can delay the milestone or weaken the business; evaluate both effects in the same forecast.
Keep the estimate decision-ready
Update the near-term cash view as new receipts, bills, and plans arrive, and refresh the monthly runway cases when actual results change the assumptions. When collections are irregular, financing transactions complicate the records, or management needs a more detailed forecast, accounting or fractional CFO support can be useful but is not required for every company. The forecast is only as useful as its treatment of actual cash availability, collection patterns, commitments, and financing conditions.
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