Runway analysis

What is the runway analysis?

A runway analysis calculates how long a business can operate with its current cash reserves, assuming existing income and expenses continue as they are. For cash burning companies, the runway analysis tracks the amount of time that the company has before it runs out of money. Think of it as your company’s financial "runway" before funds run out.

1. Runway: the cash runway is a ratio based on the cash balance and the company’s avg. monthly burn rate. To calculate runway, divide your cash balance by the monthly burn rate (how much you spend each month). If you have €500,000 and spend €50,000 per month, you have a 10-month runway.
2. Burn rate: the burn rate is the speed at which a company spends its cash reserves. It’s a look at the company’s operating cash flow, based on a 3 (or 6) months rolling average.

The runway analysis is essential for understanding whether you need to raise funds, cut costs, or increase revenue to stay financially stable.

You can adjust the runway analysis in re:cap Insights by changing the classification for the transactions on the data page.

What does it tell me about my company?

A runway analysis tells you something about:

1. Financial health: how ling your company can sustain operations with its current cash reserves.
2. Burn rate impact: whether your spending is sustainable or needs adjustment.
3. Funding needs: if and when you’ll need additional funding to avoid running out of cash.
4. Growth feasibility: whether you have enough runway to invest in growth or need focus on cost-cutting.
5. Risk level: how close you are to financial trouble.

What are the underlying data sources?

The runway analysis is based on cash transactions.

Note: You can select from different runway calculations to match your preferred approach and to ensure the runway reflects your financial reality. The options include: last 3/6 months operating cash flow (bank data) and last 3/6 months P&L (accounting data).