What is Runway? Why is it essential?

How much fuel does your business have left?

In business, we call this 'runway'.

The question is, how many months could your business survive...

if your big customer delays payment?

if sales dropped next month?

or

if all of your marketing pays off and there's a sudden demand for what you do and sales go nuts but your crew struggles to keep up and hiring skilled teams becomes a struggle before revenue turns?

A general contractor I worked with was three months from completing a nearly $2 Million project.

The finish line was in sight.

He had subcontractors to pay, materials still moving through the job and roughly $100,000 in cash on hand.

He also had access to nearly $500k on a business credit card that he was using to purchase materials, fuel his trucks, and over the last 6 months had used about 80% of that credit limit.

On paper it looked like he had plenty of runway.

Then the credit card issuer reviewed the account.

The limit was reduced.

Now he was $100,000 in the penalty.

Additional payments were demanded.

Suddenly what had felt like runway turned into turbulence.

The project didn't change.

The revenue didn't change.

His track record of on-time payments and payment in full upon project completion year over year in his business history hadn't changed.

But the structure changed.

Access to capital changed.

One lesson I've learned from watching businesses navigate growth:

Not all runway is created equal.

Some runway is cash you control.

Some runway is access that someone else controls.

And when markets get uncertain, lenders can change their appetite for risk faster than a business can change its plans.

A question every business owner should consider:

If one of your primary funding sources disappeared tomorrow, how many months of capital would your business really have?