How to calculate your cash runway and the monthly gap if revenue drops 20%

You know your revenue. The harder question for a first-time owner is how many months of bills your cash can pay. Revenued surveyed 307 small business owners and operators in February 2026. In that survey, 62.9 percent had under three months of operating cash if revenue slowed, and 33.9 percent had under one month.

The survey also found that 75.6 percent reported business costs higher than a year earlier, and 34.5 percent called them much higher. For 72.6 percent, cash flow was harder to manage than the prior year, and 42.3 percent called it much harder. The useful test is simple: how long can you pay the bills, and how much smaller does the month get when sales fall?

Runway is cash divided by burn

Count the cash you can actually use: business checking, savings, and any credit line you can draw without penalty. Do not count money you expect to collect later. Cash you can use is what is available now.

Measure your monthly burn. Take cash out in a normal month and subtract cash in. A positive result means you are losing cash each month. A negative result means you are keeping cash. The number you need is the amount that would reduce your accounts if revenue stopped, or the amount you are already losing when you are not profitable.

Divide the cash you can use by your monthly burn. The answer is your months of runway at current burn. A positive monthly cash flow means that runway is not a survival limit. Write the number down and move to the gap.

The gap is lost profit, not lost revenue

Calculate the gap for the revenue drop you are testing. Start with the lost revenue, then subtract the costs that disappear with that lost revenue. Materials, commissions, and transaction fees that exist only when a sale happens fall with the sale. The remainder is your monthly gap.

Compare the gap to your current monthly cash flow. When your normal month retains cash, a gap smaller than that retained cash does not push you into a cash loss. A larger gap can make your new monthly burn a cash loss. Divide your available cash by that new burn to see how long the drop can last before cash is gone.

If your current month is already losing cash, add that loss to the gap. The drop adds to your existing burn rather than replacing it. A profitable month can still hide a short runway.

Build the check before the slow month

Owners often discover the problem after the bills are due. In the 90 days before the February 2026 survey, owners reported cutting expenses at 16.6 percent, seeking financing at 15 percent, using savings at 14.1 percent, raising prices at 13.8 percent, and delaying expansion at 10.7 percent. Those actions are common, but they are also signs that the owner is reacting instead of planning.

Do not rely on financing as the first plan. In the 12 months before the survey, 60.9 percent of respondents had looked for business financing, and 50.3 percent of them said they were ineligible or unsure whether approval would come. In the same survey, 39.1 percent identified improving access to capital as the top policy priority for policymakers. A credit line can help, but it should be a backup, not the reason you feel safe.

Run the check monthly. Keep the results: months of runway at current burn and the monthly gap for the revenue drop you are testing. Also keep the date you last checked. A gap larger than your normal monthly cash flow will consume cash, even if sales recover later. A runway shorter than your billing cycle is a signal to choose the first move early: cut costs, use savings, or raise prices.

This article is general information, not tax or financial advice. Consult a qualified professional about your situation.