# Burn rate, cash runway and staying alive > Gross and net burn, how to calculate cash runway, and whether the company reaches its next good season before the money runs out. - Course: [Finance for Product People: From Unit Economics to Business Cases](https://productovi.com/courses/finance-for-product.md) - Module: Where did the money go? - Lesson 11/32, ~28 min - Source: https://productovi.com/courses/finance-for-product/burn-and-runway ## 3.8 million in the bank **Alex Tutor:** 1 June at Klasna. You're still on the product team, and Leo is looking at the bank balance. **Leo:** It's 1 June and we have 3,786,298 UAH in the bank, a record. Let's buy the new laptops in August as planned and stop worrying about summer. **Hanna:** A record balance in June is the normal shape of our year: families prepaid spring lessons. Here's the year so far, with my forecast for June to August. **Dataset (CSV):** [Klasna's cash and profit, September 2025 – August 2026](https://productovi.com/datasets/finance-for-product/burn-and-runway/klasna-cash-2025-2026.csv) One row per month, UAH. September–May are actual; June–August are Hanna's forecast made on 1 June. All costs are paid in the month they're incurred; the provider's 2.5% fee is taken when families pay. Cash on 1 September 2025: 600,000. - `basis`: actual or forecast - `operating_profit_uah`: Operating profit from the P&L - `lessons_delivered_uah`: What families paid for the lessons that took place that month - `families_paid_uah`: Cash in: what families paid for packages that month - `payment_fees_paid_uah`: Cash out: the provider's 2.5% of what families paid - `tutor_payouts_uah`: Cash out: tutor payouts - `video_ai_uah`: Cash out: video minutes and AI - `salaries_uah`: Cash out: team salaries and support coordinators - `office_tools_uah`: Cash out: office and tools - `marketing_uah`: Cash out: marketing - `equipment_uah`: Cash out: equipment (the laptops in August) - `net_cash_flow_uah`: Cash in minus all cash out - `closing_cash_uah`: Cash at the end of the month **Alex Tutor:** Start with how fast money leaves. **Gross burn** is all the cash going out in a month: fees, payouts, video, salaries, office, marketing, equipment. Add up June. > **Exercise:** Use the dataset. What is Klasna's forecast **gross burn** for June 2026: all cash going out that month? ## Gross burn vs net burn **Sofia:** 2.76 million out in one month? But families still pay in June. **Alex Tutor:** Which is why the number that matters is **net burn**: cash out minus cash in, the amount the bank balance actually shrinks by. When a month's net cash flow is positive, there's no burn at all. **Hanna:** In June families pay 1,460,660 for packages. Out of 2.76 million going out, that covers about half. > **Exercise:** Use the dataset. What is Klasna's forecast **net burn** for June 2026? **Alex Tutor:** Now the hardest month of the forecast. Same idea, one more line of cash out. > **Exercise:** Use the dataset. What is Klasna's forecast **net burn** for August 2026, laptops included? ## How to calculate cash runway **Alex Tutor:** **[Cash runway](/glossary/bs-runway)** is how many months the cash lasts at the expected net burn: cash today divided by the average monthly net burn ahead. $$ \text{Runway} = \frac{\text{Cash today}}{\text{Average monthly net burn ahead}} $$ *In months. Use the burn you expect, not last month's.* **Hanna:** Over June, July and August I expect a net burn of 3,933,617.75 in total, laptops included. That's 1,311,205.92 a month. **Sofia:** Why not use May's burn? In May the bank fell by only 579,217.50. **Alex Tutor:** Runway looks ahead, and summer is different: families pay far less, and the laptops land in August. So the forecast is what counts. > **Exercise:** On 31 May Klasna has 3,786,298 UAH. Hanna's forecast net burn for June–August averages 1,311,205.92 a month. What is Klasna's **runway** in months? Round to two decimals. ## Which burn goes into runway **Leo:** My own spreadsheet says we spend 2.76 million a month, so the cash lasts a month and a half. Should I panic? **Alex Tutor:** No. That's gross burn: it forgets the families who keep paying. Runway uses net burn. Gross burn tells you how big the machine is; net burn tells you how fast the tank drains. **Hanna:** Gross burn still matters to me, though: it's how much families must keep paying every month just for us to stand still. > **Exercise:** **True or false:** runway should be calculated with gross burn, because it shows everything the company spends. ## Default alive, the seasonal version **Alex Tutor:** A company is **default alive** if, on its current course, it reaches profitable ground before the cash runs out, without new money. For a startup that ground is break-even. For Klasna it's September, when families start prepaying again. **Sofia:** September is three months away, and the runway is 2.89 months. So not quite. **Hanna:** And averages are kind. My month-by-month forecast ends August at −147,319.75. The laptops alone are 432,000 of the August burn. **Alex Tutor:** So for a seasonal business, check the lowest month, not just the average. What does the runway look like without the laptops? **Alex Tutor:** Before you compute it: which check would you trust for the answer? > **Exercise:** Klasna is a seasonal business: families start prepaying again in September, three months after 1 June. Its summer net burn is uneven: 1,298,704.50 UAH in June, 867,563 in July and 1,767,350.25 in August. How should you check whether Klasna reaches September? > **Exercise:** On 31 May Klasna has 3,786,298 UAH. Hanna forecasts a total net burn of 3,933,617.75 UAH for June–August, including 432,000 UAH of laptops in August. If Klasna doesn’t buy the laptops, what is its runway on 31 May? Round to two decimals. **Alex Tutor:** Leo may not want to drop the laptops entirely. Try a middle way. > **Exercise:** Hanna's forecast ends August 2026 at −147,319.75 UAH, including 432,000 UAH of laptops bought in August. If Klasna buys only **half** the laptops in August and the rest in October, what is its cash on 31 August? ## Your turn: are we default alive? **Leo:** Straight answer, please: with 3.8 million in the bank, do we make it to September without borrowing? **Alex Tutor:** Give him the burn, the runway, the lowest month and one change that would make the answer yes. **Sofia:** Answer first, numbers after. > **Exercise:** Leo asks: "With 3.8 million in the bank, do we make it to September without borrowing?" Answer in 3–5 sentences: burn, runway, the lowest month, and one change that would make the answer yes. > **Key ideas** > > - **Gross burn**: all cash out in a month (June: 2,759,364.50 UAH). **Net burn**: cash out minus cash in, the real drop in the bank (June: 1,298,704.50). > - **Runway** = cash today ÷ average monthly net burn ahead: 3,786,298 ÷ 1,311,205.92 = 2.89 months. > - **Default alive**: reaching profitable ground before the cash runs out, without new money. For a seasonal business the ground is the next good season. > - Averages hide timing. Check the month-by-month balance: Klasna's forecast ends August at −147,319.75, and the laptops are 432,000 of it. > - Without the laptops the runway is 3.24 months, just over the three months to September. **Alex Tutor:** Next is the module's case: the whole year, profitable on paper and short of cash in August. Time to decide what to do about it. - Previous lesson: [The cash flow statement and the three financial statements](https://productovi.com/courses/finance-for-product/cash-flow-statement.md) - Next lesson: [Case: profitable on paper, short of cash in August](https://productovi.com/courses/finance-for-product/august-cash-case.md) --- Productovi Learning. Free, no sign-up needed to read.