The scariest moment in my first year running My Dabba wasn’t a bad sales week. It was realising I’d spent almost everything I had on gift-box inventory and had maybe six weeks of cash left to cover everything else. That’s when I finally learned what runway actually means, and why I now guard it like it’s the whole business. Because it kind of is.

What runway actually means

Runway is simply how many months your business can keep operating on the cash you have right now, if nothing else came in. It’s the number that tells you how much time you’ve got to fix a problem before the problem fixes you. Investors obsess over it, but for a bootstrapped Alberta product business it matters even more, because there’s no one topping up the account but you.

The formula

It’s almost embarrassingly simple:

• Runway (in months) = cash on hand ÷ monthly burn

Cash on hand is the money actually available across your business accounts. Monthly burn is how much more you spend than you bring in each month. If you’re profitable, congratulations, your runway is effectively infinite as long as that holds. Most of us early on are not, and that’s fine, as long as you know the number.

How to calculate your monthly burn

Burn trips people up because they only count the obvious bills. Add up everything that leaves the account in a normal month:

• Fixed costs: Shopify and apps, insurance, software subscriptions, your business licence spread monthly.
• Variable costs: shipping supplies, transaction fees, ad spend, packaging.
• Anything you pay yourself, even a small draw.
• Your average monthly reorder of inventory.

Then subtract the cash your sales actually deposit in a typical month. What’s left, if it’s negative, is your burn. Use a conservative sales figure, not your best month ever. Hope is not a forecasting method, I’ve tried.

Why product businesses need more runway

Here’s the part nobody warned me about. A service business turns time into money quickly. A product business turns cash into inventory, and inventory only turns back into cash after it sells and the customer pays. That gap can be months, especially when you import.

With Kind Loom, I might pay my supplier in the spring for bedding that doesn’t fully sell through until well into summer. That money is real, but it’s tied up in boxes in a storage unit, not sitting in my account paying the Shopify bill. So product businesses need a bigger cash cushion than the raw burn number suggests, because a chunk of your cash is always frozen inside inventory you can’t spend.

A worked example

Say you’ve got $12,000 in the bank. Your fixed and variable costs run $2,000 a month, and in a slow month your sales only cover $1,000 of that. Your burn is $1,000 a month.

• Runway = $12,000 ÷ $1,000 = 12 months.

Feels comfortable. But now you place a $6,000 inventory reorder. Your available cash drops to $6,000, and your real runway is suddenly six months, not twelve. Nothing about your business got worse, you just moved cash into stock. This is exactly why I check runway before every reorder, not after.

How much is enough?

There’s no universal answer, but here’s my honest rule of thumb for a small product business:

• Three months is the bare minimum, and it will make you anxious.
• Six months is where I start to breathe.
• Nine to twelve months is the goal if your sales are seasonal, which most product businesses are.

The more seasonal and inventory-heavy you are, the longer your runway needs to be, because you’ll spend big before your busy season and wait to earn it back.

Building the cushion

A cushion doesn’t appear, you build it deliberately. I treat it as a fixed cost. A set amount goes into a separate savings account every month before I let myself spend on anything optional. I keep mine in EQ Bank because the interest is genuinely better than my chequing account and it’s separate enough that I don’t casually dip into it. My full EQ Bank review explains why I use it for both my runway cushion and my tax reserve. Keeping the cushion visually separate is half the battle, because money you can see is money you’ll spend.

Check it before you commit cash

The habit that changed things for me was recalculating runway before any big decision: a bulk order, a new hire, a marketing push. It turns a gut feeling into a number. You can run yours in a couple of minutes with the free runway calculator, and it’ll show you exactly how many months a given reorder or expense leaves on the clock.

Runway isn’t about fear, it’s about giving yourself enough time to make good decisions instead of desperate ones. The months of cash behind you are what let you say no to a bad deal and yes to a good one.

This is based on my own experience — not financial, tax, or legal advice. Rules, rates, and fees change, so confirm current details with official sources like the CRA and CBSA before you decide.