Guides › Starting a business
Most people calculate what it costs to open and stop there. The number that actually matters is what it costs to survive until revenue covers costs, and that period is reliably longer than planned.
Short answer: You need enough to cover monthly running costs, including a salary for yourself, for the months until revenue covers them, plus setup costs and a buffer for delays. That period runs longer than expected because sales cycles stretch out, early customers need more support, and the first offer rarely sells. Run the numbers once with your best guess and again with everything taking twice as long at half the revenue.
Monthly costs once you are running, including paying yourself enough to not need another job, multiplied by the number of months until revenue covers those costs. Add the one-off setup on top, then add a margin for the timeline being wrong.
A useful discipline is to run it twice: once with your honest expectation, and once with everything taking twice as long and revenue arriving at half the rate. If the second version is survivable, the plan is fundable. If only the first works, the plan depends on nothing going wrong.
Not usually because the product is worse than expected. Because the sales cycle is longer than assumed, because early customers need more hand-holding than later ones, and because the first version of the offer is rarely the one that sells.
Those are normal, and none of them are failure. They are simply time, and time is the thing runway buys.
This question routes to Startup Genius — one of 29 engagements the platform runs. It does not produce advice in general; it produces this analysis for your business:
✓ Sizes who could realistically buy this — not the size of the industry
✓ Estimates what a customer costs to acquire and what they are worth to you
✓ Tests whether the gap between those two survives contact with reality
✓ Models the cash you need and when break-even actually arrives
✓ Names the assumptions the whole idea rests on, ranked by damage if wrong
✓ Gives the cheapest test that would prove the riskiest one false
You watch the analysis get built before you pay anything. Read a complete report here if you would rather see the depth first.
For a service business selling to other businesses, often six to eighteen months. For anything requiring inventory or building an audience, longer. The variable that dominates is sales cycle length, which you can estimate now by asking how long it takes someone in your market to decide to buy something similar.
Budget for it even if you defer it, because a plan that only works while you earn nothing is not a plan that survives your circumstances changing. Leaving your own cost out of the numbers is the most common way a business appears profitable while quietly not being.
Decide in advance what you will do at that point, and write it down while you are still calm. The worst decisions in a business are made in the last few weeks of runway, by someone who never planned for reaching them.
Describe the situation in your own words and we will tell you which analysis answers it — before you sign up for anything.
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