Finance
Break-Even, Burn and Runway: Reading Your Own Financial Signals
Three calculations tell you more about the health of an early business than any projection deck: break-even volume, monthly burn and runway.
Break-even volume
Divide your monthly fixed and operating costs by the contribution per unit (selling price minus variable cost per unit). The result is the number of units or customers you need each month simply to stand still.
Monthly burn
Burn is the net cash leaving the business each month: fixed costs plus operating costs plus variable costs, less collected revenue. Burn measured on invoiced revenue rather than collected cash is the most common early-stage error.
Runway
Runway is available cash divided by monthly burn. Twelve months of runway allows planning; four months of runway means every decision becomes a financing decision.
What good looks like
- Break-even volume that is a credible fraction of your addressable demand.
- Burn that falls as revenue rises, not one that rises with it.
- Runway long enough to reach the next evidence milestone, not just the next month.