Key Performance Indicators Examples
Cash runway is a metric that measures how long a company can continue to operate before running out of cash. It is typically expressed in months, and it is used to measure the company’s financial health and to identify areas where improvements can be made.
The formula for cash runway is:
Cash Runway = Available Cash / Monthly Burn Rate
It is calculated by dividing the company’s available cash by its monthly burn rate. The resulting number represents the number of months that the company can continue to operate before running out of cash at its current spending rate.
For example, if a company has $100,000 of available cash and a monthly burn rate of $25,000, the cash runway would be 4 months (100,000/25,000 = 4)
It’s important to track the cash runway over time, compare it against industry benchmarks and historical data, to identify areas where the company’s operations can be improved. It’s also important to track the cash runway by different segments, such as by different teams, products, or locations, in order to identify where the problem is and take action to improve the cash runway.
Cash runway is an important metric for startups, as it allows them to evaluate the effectiveness of their operations and make decisions about investments, finances, and growth.
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