Every founder can tell you roughly what is in the bank. Far fewer can tell you what that figure means, which is the only question that matters. Cash in the bank is a fact. Runway is a decision-making instrument, and the difference between the two is the difference between knowing you have £180,000 and knowing you have until March.
Here is the uncomfortable truth that most guidance on burn rate soft-pedals: runway is not a measure of how long you can survive. It is a measure of how much negotiating leverage you have. A founder with nine months of runway is having a conversation with investors. A founder with three months is having a conversation with whoever will move fastest, on terms set by someone else. The business may be identical. The outcome is not.
This piece explains the two burn measures and why the distinction matters, how to calculate runway honestly, what the current UK funding market means for how much you need, and when to start raising.
The two burn rates
Gross burn is total monthly operating cash outflow. Everything leaving the account: salaries, rent, software, suppliers, professional fees.
Net burn is gross burn less cash received. It is the amount by which your cash position actually falls each month.
Founders quote net burn because it is the smaller and more comfortable number. Investors and lenders look at both, and the gap between them tells them something specific: how dependent your survival is on revenue continuing to arrive exactly as forecast.
A company with £90,000 gross burn and £15,000 net burn looks efficient. It is also a company where a single delayed customer payment swings the monthly position by a large multiple of its net burn. A company with £30,000 gross burn and £15,000 net burn has the same net position and far less fragility. Same headline, entirely different risk.
Track both. Report net burn to yourself for planning and know your gross burn for stress-testing, because the downside scenario every lender asks about is essentially a question about gross burn.
Calculating runway honestly
Runway is cash divided by net monthly burn, and almost every founder overstates it in the same four ways.
Using a flattering month. A single month’s burn is noise. Use a rolling three-month average, and if your business is seasonal, be explicit about which part of the cycle you are in.
Counting cash you do not have. Money owed to you is not cash. A debtor book of £80,000 on 60-day terms is not runway; it is a forecast with counterparty risk attached. If you want to count it, count it on the date it realistically lands, not the date the invoice says.
Ignoring what is already committed. Corporation tax, VAT, a section 455 charge, an annual insurance renewal, a software contract that auto-renews in February. These are cash that has already left; it simply has not moved yet. Runway calculated before deducting known lumpy outflows is fiction.
Assuming burn stays flat. It will not. Hiring, marketing spend, and price increases all push it up. Model your burn as it will actually be, not as it was last month.
Do the honest calculation and then do a second one at 70 per cent of forecast revenue. The difference between those two numbers is the range you are actually operating in, and the lower one is what a lender will use.
What the current market means for how much runway you need
The conventional guidance was eighteen months of runway after a raise. The market has changed enough that the number deserves re-examination.
Equity conditions have tightened materially. British Business Bank data shows deal volumes among smaller businesses fell 17 per cent in 2025 while investment value fell only 4 per cent, meaning fewer companies raised larger amounts [1]. That concentration intensified into the first quarter of 2026, when equity investment into smaller businesses fell 43 per cent from the previous quarter [1]. Artificial intelligence companies took 44 per cent of all equity investment into smaller businesses in 2025, the highest share on record, from 26 per cent of deals [1]. Equity finance overall has fallen back to levels last seen in 2019 [2].
Two practical consequences follow.
Raises take longer than they did. A process that took four months takes six or more, and every additional month of process is a month of runway consumed while your attention is on the raise rather than the business.
And if you are outside the sectors currently attracting concentrated capital, you should plan on the longer end of every estimate rather than the average.
The debt market tells a different story, and founders should notice it. Gross SME bank lending rose 9 per cent to £68bn in 2025, the second highest level in 13 years [2]. For a business with revenue to service repayments, debt is available and does not consume runway in the way an equity process does, because the assessment is faster and the founder time required is a fraction.
When to start raising
The answer is earlier than feels necessary, and it follows directly from the arithmetic above.
If a raise realistically takes six to nine months from first conversation to cash in the bank, and you want to be negotiating rather than accepting, you need to start when you have nine to twelve months of runway. Founders who start at six months are running a process against a deadline. Founders who start at three are not running a process at all.
There is a second reason to start early that has nothing to do with leverage. Investment readiness work takes time. Cap table problems, missing shareholder agreements, intellectual property held personally rather than by the company, advance assurance for SEIS or EIS: each takes weeks and several take months. Discovering them during a raise is what turns a six-month process into a nine-month one.
The signal to watch is not a date; it is a threshold. Set a runway floor, write it down, and treat crossing it as a trigger for a decision rather than a cause for concern. Below the floor you have three options, and they should be named in advance: raise, cut, or accelerate collections. Founders who have not pre-committed tend to choose hope.
The mistakes I see most often
Reporting runway to investors from a model nobody has stress-tested. If your deck says fourteen months and your model says nine, you have not made an error in a spreadsheet. You have shown a reader that nobody checked, and everything else in the file is then read sceptically.
Cutting the wrong costs. When runway tightens, the instinct is to cut marketing and sales, because those cuts are painless this month. They are also the costs that generate the revenue extending your runway. Cut delivery inefficiency, unused software and premises before you cut demand generation.
Confusing profitability with runway. A profitable business can run out of cash, and growing ones frequently do, because growth consumes working capital. If you pay suppliers before customers pay you, every additional pound of revenue widens the gap.
Treating a bridge round as neutral. Bridges are usually raised from a position of weakness and priced accordingly. They also consume the same founder attention as a full round for a fraction of the capital.
Not counting the founder’s own unpaid time. Where a founder has deferred salary to extend runway, the runway figure is real and the arrangement is not sustainable. Model it honestly, because a lender or investor will ask what happens when you start paying yourself properly.
Waiting for a milestone that is not funded. Raising an amount that funds fourteen months of work toward a milestone that takes twenty guarantees a second raise from weakness. Size the round from the milestone, then add a buffer, rather than sizing it from what feels achievable.
What to do this week
- Calculate gross and net burn from a rolling three-month average. Both numbers, not just the comfortable one.
- List every committed outflow for the next twelve months. Tax, VAT, renewals, contracted increases. Deduct them before you calculate anything.
- Calculate runway twice. Once on plan, once at 70 per cent of forecast revenue. Use the second figure for decisions.
- Set a runway floor and write down what happens when you hit it. Raise, cut, or collect. Decide now, not at the time.
- Reconcile the runway figure across every document. Deck, model, plan and board pack must agree. This is the cheapest credibility available and the most commonly skipped.
- Test whether debt is the better instrument. If the business has revenue to service repayments, debt is faster, cheaper in ownership terms, and does not consume six months of founder attention.
- Start the readiness work at nine to twelve months, not at six. Cap table, agreements, intellectual property, scheme assurance. All of it takes longer than founders expect.
The principle underneath all of this
Runway is the only number in a startup that converts directly into negotiating position. Everything you might want from a funding round- valuation, terms, the choice of investor, the ability to walk away- is a function of how long you can continue without saying yes.
Founders tend to treat runway as a survival metric and manage it defensively, cutting when it shortens. The founders who do well treat it as leverage and manage it offensively, starting the process while the number is still comfortable enough that they could stop.
Want a stress-tested view of your runway before you start a raise? Every SGI funding engagement opens with an Investment Readiness Assessment covering exactly this. Since 2014, we have advised more than 2,000 businesses across 47 industries and facilitated over £250M in client funding at a 90 per cent success rate. Book a conversation or read about the Business Funding Service.
SGI is not authorised by the Financial Conduct Authority. Where an element of a transaction requires FCA authorisation, such as credit broking, we work with authorised partners.
Frequently Asked Questions
What is the difference between gross burn and net burn?
Gross burn is total monthly cash going out. Net burn is that figure less cash coming in, so it is the amount your bank balance actually falls each month. Founders quote net burn; investors look at both, because the gap between them shows how dependent the business is on revenue arriving exactly as forecast.
How much runway should I have before raising?
Nine to twelve months at minimum if you want to negotiate rather than accept. A UK equity round realistically takes six to nine months from first conversation to cash, and conditions have tightened, with deal volumes among smaller businesses down 17 per cent in 2025 and a further sharp fall in the first quarter of 2026.
Should I include money owed to me in my runway calculation?
Not as cash. A debtor book is a forecast with counterparty risk, not a bank balance. If you include it, include it on the date it realistically lands rather than the invoice due date, and be prepared to explain the assumption to anyone assessing you.
What is a reasonable burn rate?
There is no universal figure, because it depends entirely on what the spending is buying. The more useful test is whether burn is producing progress toward a milestone that unlocks the next stage. Burn that funds activity rather than progress is the problem, at any level.
Is it better to raise debt or equity to extend runway?
If the business has revenue to service repayments, debt is usually the better instrument. It is faster to arrange, costs interest rather than ownership, and consumes a fraction of the founder’s attention. Equity is appropriate where there is a genuine gap between investment and the revenue that would repay it.
What should I cut first when runway tightens?
Delivery inefficiency, unused software and premises before demand generation. The instinct is to cut marketing and sales because those cuts hurt least this month, but they are the costs generating the revenue that extends your runway, so cutting them shortens it.
References
- British Business Bank, Small Business Equity Tracker 2026, June 2026. https://www.british-business-bank.co.uk/news-and-events/news/ai-dominates-uk-smaller-business-equity-market-record-investment-share-overall-funding-falls
- British Business Bank, Small Business Finance Markets Report 2025/26, March 2026. https://www.british-business-bank.co.uk/about/research-and-publications/small-business-finance-markets-report-2026
- BVA BDRC, SME Finance Monitor: 3-month rolling analysis to end December 2025, January 2026. https://www.bva-bdrc.com/sme-finance-monitor/
- HM Revenue and Customs, Seed Enterprise Investment Scheme, GOV.UK. https://www.gov.uk/guidance/venture-capital-schemes-apply-for-the-seed-enterprise-investment-scheme
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Kurt Graver is the founder and CEO of SGI Consultants, a business consultancy that has helped over 2,000 entrepreneurs establish successful startups using systematic business development methodologies. An accountant with an MBA and 25 years of commerce and consultancy experience, Kurt specialises in strategic planning, market analysis, and sustainable business growth