Margin tells you about the deal. Runway tells you about you.
If you are paid in lumps, you almost certainly know your margin. Freelancers know what a project clears. Consultants know their day rate against their costs. Contractors price the job and the materials. Commission sales reps know the split. Real estate wholesalers can tell you the spread on an assignment to the dollar, and agents know their side of a closing. That number gets checked before every job, and it should be.
Here is the number that almost nobody checks: how long you can survive the gap between those jobs. Margin is a fact about one deal. Endurance is a fact about you, and they are not the same question. A consultant clearing $9,500 a project has a lovely margin and can still be in trouble in month four, because the margin was never in dispute. The calendar was.
That is the whole idea behind this page. A startup burn rate calculator assumes money arrives smoothly, in monthly increments, the way a subscription business or a payroll works. Deal-based income does not behave like that at all, and the difference is not a detail: it changes which number you should be watching, and it changes what "three months of expenses" actually protects you from.
The formula
Runway (months) = cash on hand ÷ monthly burn
Runway is deliberately calculated with no income at all, because the average month is not the month that ends a business. The empty one is. Break-even pace turns your costs into a schedule: it is how often a deal has to land for the account to stay exactly where it is. And drought risk is the probability that the next gap outlasts your cash, on the assumption that deals arrive independently at your average rate, which is the assumption we go on to pick apart below.
Worked example
Someone whose income arrives one signed deal at a time. They have $24,000 in the bank. Fixed costs, personal and business together, run $4,200 a month, and they spend another $1,500 a month finding work. Each deal nets them $9,500, and one closes about every 3 months. Their marketing costs about $9,000 per deal it produces, so half their work comes from what they spend and half arrives by referral and repeat business.
Burn and runway. $4,200 + $1,500 = $5,700 a month. Against $24,000 of cash that is 4.2 months with nothing closing at all.
The break-even pace. $9,500 ÷ $5,700 means they need one deal every 1.7 months just to stand still. They are closing one every 3 months, which brings in $3,166.67 a month against a $5,700 burn: going backwards by $2,533.33 a month, about $30,400 a year, while every single deal they close is profitable.
The drought. Runway of 4.21 months against an average gap of 3 months gives e−1.40, or about a 25% chance that the next dry spell runs longer than the money does.
The obvious move, priced. Cut the marketing by 40%, to $900. Burn falls to $5,100 and runway stretches to 4.7 months, which feels like progress. But half their deals came from that spend, so the pace slows from one every 3 months to one every 3.8, and the drought risk goes up, from 25% to 29%. The longer runway is real. It is just outrun by the longer gap. Their monthly shortfall gets slightly worse too, from $2,533.33 to $2,566.67.
An average of one deal a month does not mean one deal a month
This is the part that gets people, and it is not a failure of discipline. It is arithmetic. If deals arrive independently at some average rate, the time between them is not clustered around the average: it is exponentially distributed, which means short gaps are common, and long gaps are much more common than intuition allows. A gap twice your average is entirely ordinary. A gap three times your average will happen to you.
So the useful question is not "what do I average" but "how long is the run I have to survive". If your runway equals your average gap exactly, the chance the next gap outlasts your cash is 1 divided by e, which is 36.8%. Read that again, because it is the single most useful number on this page. Matching your cash to your average gap leaves you with better than a one in three chance of running out, and it feels prudent while you are doing it.
This is the same shape of problem our risk of ruin calculator handles for traders: a real edge on every event, undone by the run of events in between. The trader has a positive expectancy per trade and can still hit zero. You have a profitable deal and can still hit zero. In both cases the thing that decides it is not the quality of the edge. It is how much room you left between yourself and the bottom.
Two honest caveats about the 25% or 37% or whatever your own number turns out to be. First, it is not a forecast: it is what the model says about a stylised world in which deals arrive at random. Second, and more importantly, real life bends it in the wrong direction. Pipelines are seasonal, which clusters the dry spells rather than spreading them out. And there is a feedback loop that no formula catches: a person low on cash stops paying for lead generation, stops taking the slow-burning meeting, and negotiates like someone who needs this one. Treat the number as a floor on the risk, not a ceiling.
The marketing paradox
Marketing is usually the largest line in the burn that you can actually change this week. Rent is a contract. Insurance is a contract. The tax set-aside is not optional. But the ads, the mailers, the lists, the tools, the person you pay to find work: that is a dial, and when cash gets tight it is the dial everyone reaches for.
The trouble is that this particular dial is attached to the thing that makes deals. Turn it down and two numbers move at once, in opposite directions. Your runway gets longer, because the burn is smaller. Your gaps get longer too, because fewer deals are being made. Whether you end up safer depends entirely on which of those moves further, and the answer is not a matter of temperament.
Here is the rule that falls out of the arithmetic, and as far as we can tell nobody else's burn rate calculator will tell you this:
SMALLER share of your deals than it is of your burn.
Both halves of that are numbers you can look up. If marketing is 40% of what you spend every month but produces only 15% of your work, cutting it buys you real endurance and you should stop feeling brave about the decision. If marketing is 10% of your burn but brings in 70% of your deals, cutting it lengthens your runway and lengthens your gaps faster, and you have made yourself less safe while doing something that felt responsible. The worked example above is the second kind, which is why the calculator tells that person not to cut.
To answer it for yourself, put a number in the marketing cost per deal box. That is the only input that lets the model separate the work your spending buys from the work that arrives anyway. Leave it blank and the calculator falls back to the straight-line assumption that every deal comes from marketing, which can only ever conclude that cutting hurts. We say so on the result rather than letting a default pretend to be a finding.
Two limits worth naming. Real response curves bend: the dollars you cut first are usually the least productive ones, so a genuine cut often costs fewer deals than this straight line predicts, which means the model is harsh on cutting and a cut it still endorses is a strong case. And marketing works on a lag, so for the first month or two after a cut you keep the deals that are already in the pipeline while banking the savings. That short window flatters the decision. The gap arrives later, which is exactly when the cash is thinnest.
What counts as a fixed cost when you are the business
Your own household costs. All of them.
This is the line people leave out, and leaving it out is what makes a burn rate calculation look survivable when it is not. If you are a sole trader, an independent contractor, a commission rep, or anyone else whose company is mostly one person, then rent or mortgage, food, insurance, the car, childcare, and the minimum payments are not personal matters that sit outside the business. They are the cost of keeping the business's only employee operational. A business that cannot pay its owner's rent is not solvent. It is being quietly subsidised by a savings account, a partner, or a credit card, and all three of those run out.
Include the tax set-aside too. Money owed to a tax authority is not working capital, however much it looks like it in a bank balance. On lumpy income this is its own endurance problem, because the tax bill is calculated on a whole year while the cash arrived in three or four uneven bursts and got spent in twelve even months. Our quarterly tax calculator works out the size of that slice. Put the result in your fixed costs here, and take it out of the net per deal so it never gets counted as spendable twice.
One more thing that belongs in fixed costs and rarely gets there: the cost of the deals that die. If you spend real money on jobs that do not close, deposits, inspections, samples, travel, proposals, then your net per deal should be the average across everything you chased, not the profit on the ones that worked. Our break-even calculator is the right tool if you would rather work this in units and contribution margin, and our customer lifetime value calculator is the one to reach for when a client is worth more than the first deal they bring.
What this model cannot see
Quite a lot, and it is better that you hear it here than find it out later. It does not know about your credit line, which is borrowed runway and real right up until the moment somebody reprices it. It does not know about a partner's income, which is the most common reason a household survives a gap that the arithmetic said it would not. It does not know about the deal you already have under contract, which changes everything for one month and nothing after that. It cannot see a client who pays in 90 days, so a deal that closed is not yet cash, and this page counts cash. And it has no idea whether your average gap is really your average, because most people are estimating it from the good year.
There is also a part of endurance that no calculator reaches. Running low on cash is not only a financial condition. It shortens your patience, narrows your options, and makes you accept the wrong deal at the wrong price, which is how a temporary cash problem turns into a permanent pricing problem. That is a real cost and it belongs in the decision even though it will never appear in a formula.
So use the number for what it is good for. Not a forecast, and certainly not a verdict on whether this kind of work is a good idea, which is a question about you and your market and not about arithmetic. What it does well is make the invisible half of your business visible: not what a deal is worth, but how long you can wait for the next one.