How long could we last if sales stalled?

Knowing your cushion changes how boldly you can move, and how fast you need to react.

Runway is the number of months your cash covers the costs you can’t turn off. It’s the simplest stress test a business can run, and it takes about 20 minutes.

An approach

1. Add up monthly fixed costs. Payroll you’d keep, rent, debt payments, insurance, software.
2. Divide cash on hand by that number. That’s your runway if revenue stopped completely.
3. Run a realistic version. Revenue down 30%, not to zero. How many months then?
4. Set a trigger. Pick the cash level where you’d act, such as pausing hiring, cutting spending or drawing on a line of credit, and write it down.

Related

• Are we measuring what we need to make better decisions?
• When can we afford to ___?

A short starting guide. More detail is on the way.