I started my business because I wanted to help founders build companies that matter. Companies with ambition. Companies solving real problems.

But ambition alone doesn’t keep the lights on. Cash does. And in technology businesses especially, understanding burn rate and runway is often the difference between building the future you imagine and running out of time before you get there.

I see this every week in my work as a fractional CFO and finance business partner. Understanding how to calculate burn rate, how to interpret runway, and how to actively manage both is one of the most important leadership skills a technology founder can develop.

What Is Burn Rate? (And Why It Matters in Tech Companies)

At its simplest, burn rate is how much cash your business is consuming over a period of time, usually per month.

But in practice, it’s rarely that straightforward.

For early and scaling tech companies, burn rate isn’t just a cost metric. It’s a reflection of your strategy. It tells me:

• How aggressively you’re investing in growth

• Whether your cost base matches your stage of development

• How much room you have to experiment, pivot, or wait for the market to catch up

I often see founders calculate burn as: “We spent £80k more than we made last month, so our burn is £80k.”

That’s not wrong, but it’s incomplete. I encourage founders to look at burn rate in two ways:

Gross burn rate - The total amount of cash leaving the business each month, including payroll, cloud infrastructure, software tools, and overheads.

Net burn rate - The difference between cash outflows and cash inflows in a given month.

This distinction is critical. Many tech companies have strong contracted or recurring revenue but still experience cash pressure due to billing cycles, payment terms, or upfront investment in growth.

One of our clients had strong contracted revenue but long payment cycles. On paper, the business looked healthy as the revenue was there. In reality, cash was leaving faster than it was arriving. Until we adjusted how they understood burn, the risk was invisible.

How to Calculate Runway Accurately

Runway tells you how long your business can operate before it runs out of cash, assuming your current burn rate remains unchanged.

The basic formula is simple: Runway = Cash in the bank ÷ Net monthly burn rate

But again, simplicity can be dangerous if it creates false confidence. I’ve worked with technology founders who proudly told me they had “16 months of runway,” only for that number to collapse to 8 months once we factored in:

-       Planned hires and salary increases

-       Rising cloud and infrastructure costs

-       Changes in client payment behaviour

-       One-off costs that are likely to repeat

Runway isn’t a static number. It’s a moving forecast. And if you’re not actively managing it, it will quietly shrink while you focus on product, clients, and growth, which is exactly what founders should be focusing on, but they also need to keep an eye on the runaway. Or delegate this to someone else.

Managing Burn Rate Without Slowing Growth

One of the biggest misconceptions I see is that managing burn rate means cutting costs or playing defensively. Sometimes that’s necessary. Often it isn’t.

Effective burn rate management is about intentional investment, not cost-cutting.

In one growth-stage technology business I supported, the instinct was to slow hiring because cash felt tight. Instead, we:

• Modelled multiple burn scenarios

• Linked spend directly to revenue and product milestones

• Identified which roles reduced risk and which could wait

The result? They hired earlier than planned, but with confidence. Burn increased, runway shortened slightly, but execution improved, and fundraising conversations became far stronger because the story made sense.

That’s what good burn management does. It aligns cash with strategy.

Why Burn Rate and Runway Are Leadership Metrics

The founders I enjoy working with most don’t see burn rate and runway as a constraint. They see the metrics as decision-making tools.

When you truly understand your burn and runway, you can:

• Decide when to raise, not react when you have to

• Hire strategically to ensure cash preservation

• Communicate clearly with investors and boards

• Sleep better, knowing the numbers won’t surprise you

This is why at FDL we don’t just report numbers. We translate them. We challenge assumptions. We help founders see what’s coming before it becomes urgent.

Final Thoughts: Cash Is the Clock on Your Vision

Burn rate and runway determine how much time and cash your business has to realise its ambition. When managed well, they give you options, confidence, and control. When misunderstood, they quietly limit your future.

To learn more about the difference between Cash and Profit, check this article: