Cash runway: How to calculate and extend it

Running a business often means balancing ambition with reality—and one of the most critical realities is cash. Your ability to track how long your current cash will last, known as your cash runway, can shape everything from hiring decisions to product launches. 

For small-business owners, understanding this metric isn’t just about survival—it’s about creating the breathing room to seize opportunities, navigate uncertainty and scale with confidence. Keep reading to learn more.

What you’ll learn:

• Cash runway calculates how long your current cash reserves will last—assuming no other revenue or funding is coming in.

• Calculating your cash runway is simple: It’s your current available cash divided by your monthly burn rate, or the amount of cash you spend each month.

• There are ways to extend your cash runway, which include reducing expenses, increasing revenue and identifying opportunities to secure new funding.

Cash runway is the amount of time your business can continue operating before its cash reserves run out, assuming no new funding comes in.

It’s often measured monthly and depends on two main factors:

1. How much cash you have on hand

2. How quickly you’re spending that cash, or your burn rate

For entrepreneurs and small-business owners, knowing your cash runway offers more than peace of mind. It’s a forward-looking tool that can help you make proactive decisions. Whether you’re planning for growth, preparing for a potential slowdown or approaching investors, understanding your runway can give you the clarity to act strategically instead of reactively.

Calculating your cash runway follows a clear formula:

Cash runway = Current cash balance ÷ Monthly cash burn rate

• Current cash balance: The amount of cash your business has available today

• Monthly cash burn rate: The amount of money your business spends each month

While the math is fairly simple, the insight it provides is powerful. Calculating your runway regularly can help you see whether your business is moving toward stability or signaling the need for adjustments. It’s not just an accounting figure—it’s a decision-making tool.

Suppose your business has $120,000 in cash reserves. Each month, you spend about $30,000 to cover expenses like payroll, rent and vendor payments.

Using the formula:

$120,000 ÷ $30,000 = 4

Your cash runway is four months. In other words, if nothing changes—no new revenue, no new funding—you could continue operating for four more months before running out of cash.

This kind of calculation gives you a clear timeline, which can be essential when planning for growth, making cost-saving decisions or preparing to raise capital.

Your runway isn’t fixed. Small adjustments—or bold moves—can enable your business to grow, adapt or navigate unexpected challenges. 

Here are three common strategies to extend your cash runway:

Look for opportunities to cut costs without weakening your core operations. Streamlining processes, renegotiating vendor contracts or delaying nonessential purchases can free up working capital. Even small savings can improve cash flow, which in turn lengthens your runway.

Real-world application: A small e-commerce business notices that its monthly subscription software costs add up to $3,000. By consolidating tools and negotiating lower rates, the business reduces these expenses by $1,500 per month. Updating its cash-flow projections to reflect these savings shows the business can extend its runway significantly.

Extending your cash runway isn’t only about cutting expenses—it’s also about finding ways to increase revenue.

Raising prices strategically, upselling to existing customers and accelerating collections can all increase revenue. These efforts not only add time to your runway, but they can also bring your business closer to its break-even point—where you’re bringing in enough revenue to cover expenses.

Real-world application: A local coffee shop struggles to reach its break-even point and, in response, introduces a subscription program for frequent customers. By offering prepaid monthly coffee packages, the business increases predictable monthly revenue, which shortens the time to break even and adds extra months to its cash runway.

Sometimes the best way to extend your cash runway is to bring in outside capital. Options range from business loans and lines of credit to equity investments. Even tools like a business credit card can provide short-term flexibility while you work toward long-term stability.

Real-world application: A boutique agency is running low on cash but has steady monthly revenue. The agency secures a small-business line of credit to cover short-term expenses while continuing operations. This additional funding extends the agency’s runway, enabling it to pursue new projects without disruption.

Understanding your business’s cash runway means understanding how long you can continue to operate before running out of cash—which empowers you to make proactive, strategic decisions. 

To extend your cash runway, a strategy like reducing expenses, boosting revenue or securing additional funding can be a good place to start.

If you’re ready to take the next step to manage cash flow and extend your runway, compare business credit cards from Capital One. Get pre-approved, with no harm to your credit, and find the card that best fits your business’s needs.