| Month | Revenue | Costs | Profit/Loss | Cash Balance |
|---|
How to build a monthly budget and calculate your cash runway
In short: a monthly budget compares revenue against fixed and variable costs to find your profit or loss. If costs exceed revenue, your runway — cash on hand ÷ monthly loss — tells you how many months you have before the account hits zero. Positive cash flow means there's no countdown: you're adding cash, not burning it.
Formula
Total Costs = Fixed Costs + (Revenue × Variable Cost %) Profit/Loss = Revenue − Total Costs Runway (months) = Starting Cash ÷ |Profit/Loss| (only when Profit/Loss is negative)
Example
A startup earns $50,000/month, has $30,000 in fixed costs (salaries, rent, tools) and 10% variable costs ($5,000). Total costs = $35,000, so monthly profit is $15,000 — cash grows every month, no runway limit. If fixed costs were $55,000 instead, total costs would be $60,000, a $10,000/month loss. With $100,000 in the bank, that's a 10-month runway before the balance hits zero.
Benchmarks
| Metric | Healthy range |
|---|---|
| Runway, bootstrapped business | 12+ months |
| Runway, VC-backed pre-product/market fit | 18–24 months |
| Net margin, services business | 10–20% |
| Net margin, early-stage SaaS | −20% to 10% (growth-funded) |
| Variable cost ratio | under 30% of revenue |
Common mistakes
Forgetting one-time costs (equipment, legal, taxes) when projecting months ahead. Budgeting against invoiced revenue instead of cash actually collected — unpaid invoices don't cover payroll. Ignoring seasonality, so a flat monthly average hides risk in slow months. Treating "profitable on paper" as "safe" without checking the actual bank balance. Not updating the budget after a real month closes, so the plan drifts from reality.
Frequently asked questions
What's a good monthly burn rate for a startup?
There's no universal number — it depends on your runway and growth stage. As a rule of thumb, keep runway above 12 months if you're not actively raising, and recalculate burn every time a major cost changes.
How is runway different from burn rate?
Burn rate is how much cash you lose per month. Runway is how many months you can survive at that burn rate — cash on hand divided by the monthly loss.
Should I include my own salary in fixed costs?
Yes. Founder pay is a real cash cost even if you plan to defer it — exclude it and your budget will understate how much cash you actually need.
What counts as a variable cost?
Costs that scale with revenue or volume: payment processing fees, materials, shipping, sales commissions. If a cost stays the same whether you sell $0 or $100k, it is fixed, not variable.
How often should I update my budget?
Monthly, right after you close the books for the previous month. Swap projected numbers for actuals so the forecast stays grounded instead of drifting from your original assumptions.
What if my profit is positive — do I still have a runway number?
No — runway only applies when you are losing money. A positive monthly profit means your cash balance grows every month, so there is no countdown to calculate.