Runway

Cash divided by monthly burn. Twelve months of runway is comfortable, six is tense, three is an emergency that should already be changing your decisions.

Runway applies to individuals as much as companies. Someone quitting a job to build something should know their personal runway to the month, because it determines whether they are making calm decisions or desperate ones.

Say you have $30,000 saved and your life costs $2,500 a month. That is twelve months of runway on paper. In practice it is closer to eight: costs rise once you are at home all day, the first tax bill arrives, and whatever revenue you do make takes another sixty days to land in the account.

Set your floor before you need it. Three months of runway is where good judgement stops - it is the point at which people take the wrong client, sign the wrong lease, or ship something they know is not ready. Write down the number at which you go back to paid work while the decision is still a calm one, and treat reaching it as a plan rather than a defeat.