How much cash runway is enough for a small business?

Start with net burn, not just the bank balance

Cash runway is the number of months a business can keep operating before its available cash is exhausted. The useful version protects a safety buffer first, then divides the remaining cash by monthly net burn.

Net burn is monthly cash spending minus monthly cash income. If income already covers spending, a simple runway number is less useful; focus instead on cash-flow timing and the size of the reserve.

Use three scenarios

A single forecast can create false confidence. Compare a base case with a slower-sales case and a cost-reduction case.

• Base case: use the recent average for income and spending.
• Pressure case: reduce expected income and include known one-off costs.
• Action case: model costs you could realistically pause or remove.

Turn the answer into a trigger

Choose a runway threshold that prompts action before cash becomes urgent. The right buffer depends on revenue predictability, access to finance, customer concentration and how quickly costs can change.

This is planning guidance, not financial advice. Reconcile the inputs to current bank balances and your own cash-flow forecast before making a funding or spending decision.