The runway myth: subtract your committed POs first

Every founder can tell you their runway. Cash in the bank, divided by monthly burn, equals months of life left. It is the most repeated number in ecommerce and it is almost always wrong, because it counts money that is already spoken for. If you signed a purchase order with your factory 60 days ago, that cash is not yours. It is sitting in your account waiting for a due date.

This post is about the gap between those two numbers. Not a small gap: on an illustrative brand built from the inputs below, it is the difference between 6.7 months and 3.7 months of life. Same bank balance.

The runway math almost everyone runs, and where it breaks

The standard calculation has two inputs. Cash on hand, and average monthly burn. Divide one by the other, get a number of months, and plan hiring, ad spend, and your next raise around it.

The problem is that a bank balance is a historical fact. It tells you what has already arrived and settled. It does not know that $180,000 of it is promised to a factory in Vietnam on a date you agreed to in writing. Your burn rate does not know either, because burn is an average of what has already left, not a schedule of what is about to.

The pattern I see over and over with founders at this size is that they can quote me their cash balance and their burn rate instantly, off the top of their head, and the purchase orders already sitting with the factory never enter the conversation. Not because anyone is hiding them. They are just filed somewhere else, in a different system, owned by a different person, and they never make it into the number the founder repeats out loud.

So take a brand that looks like this. Say it holds $400,000 in cash, burns $60,000 a month in operating costs, and has $180,000 of signed purchase orders it has not yet paid, all of it non-cancelable at this point.

Run the headline math: $400,000 divided by $60,000 is 6.7 months. Now net the commitments out first: $400,000 minus $180,000 leaves $220,000 of cash that is genuinely uncommitted, and $220,000 divided by $60,000 is 3.7 months. The gap is exactly three months.

Three months is the difference between a controlled raise and a fire sale. It is the difference between negotiating your next PO and accepting whatever terms you are offered. And nothing about the business changed between those two numbers. Only the arithmetic did.

Line item	Amount	How it is derived
Cash in the bank	$400,000	Stated input
Monthly operating burn	$60,000	Stated input
Headline runway	6.7 months	$400,000 / $60,000
Less: signed POs not yet paid	($180,000)	Stated input
Cash actually available	$220,000	$400,000 - $180,000
Committed-net runway	3.7 months	$220,000 / $60,000
Difference	3.0 months	6.7 - 3.7

The professional fix already has a name

Here is the part that should be reassuring and slightly annoying at the same time: this is a solved problem. It has been solved for decades. It just got solved in corporate treasury and restructuring departments, not in DTC.

The tool is the 13-week rolling cash flow forecast. Instead of dividing a balance by an average, it models liquidity week by week: opening cash, minus committed disbursements (payroll, rent, accounts payable, and committed purchase orders modeled as forecasted accounts payable), plus expected receipts, equals closing cash. That closing balance rolls into next week's opening balance. Thirteen weeks out, refreshed weekly.

Two things make it work where cash-divided-by-burn fails. First, it treats a committed PO as what it actually is: a near-certain future cash outflow with a date attached. Second, it is weekly, so it catches the specific Tuesday when a supplier deposit, payroll, and a quarterly tax payment all land in the same seven days. A monthly average cannot see that week. It nets it out against the three good weeks around it and reports a healthy month.

Worth being precise about what this claim is and is not. There is no single canonical report that "proves" founders overstate runway by some measured percentage, and we are not going to invent one. What is documented is narrower and, honestly, more useful: professional treasury practice has netted committed obligations out of available cash for a very long time, and the cash-divided-by-burn habit is a methodology gap against that standard. That is an argument about method, not a measured statistic about founders.

If you want the mechanics of building one, we have written the step-by-step cash flow forecast walkthrough and a comparison of the forecasting tools worth using separately.

What this looks like in a real company's books

Public companies have to disclose this, which is convenient, because it means we can stop hypothesizing and look at a real balance sheet.

The Beachbody Company reported $33.4 million in cash and cash equivalents as of December 31, 2023. In the same 10-K, Note 13 discloses $17.5 million in non-cancelable inventory and service purchase commitments due within the following 12 months. That is 52% of the cash balance, already committed, disclosed in the same document.

It gets sharper, with a caveat attached. The MD&A liquidity section of that filing discloses a broader figure: $22.8 million of lease obligations and purchase commitments "associated with contracts that are enforceable and legally binding." Against $33.4 million of cash, that is 68%. But the $22.8 million is not a 12-month number the way the $17.5 million is. It is an all-years total running through 2028: $19.2 million of purchase commitments across every remaining contract year plus $3.6 million of lease payments through 2027. The $17.5 million due within 12 months is the number that matches this post's runway frame; the $22.8 million shows how much bigger the picture gets once every future year of commitments is added in, not how much is due in the next 12 months. If you want the closest like-for-like comparison, the filing's own maturity schedule breaks out $2.1 million of the lease total as due in 2024 specifically. Add that to the $17.5 million of 12-month purchase commitments and the true within-12-months figure is about $19.5 million, or 58% of cash, still short of the $22.8 million all-years total but higher than the purchase-commitments-only $17.5 million.

Line item	US$ millions	Share of cash
Cash and cash equivalents	33.4	100%
Non-cancelable inventory and service purchase commitments due within 12 months	17.5	52%
Total lease and purchase commitments enforceable and legally binding	22.8	68%

Be careful with what this proves. This is one company, at one moment, and it is a subscription fitness and nutrition business rather than an import-heavy apparel brand. The 52% and 68% are not a benchmark and we are not going to pretend they are typical. What they are is proof that the mechanism is real and can be very large in an actual audited set of books. A company with $33.4 million in the bank had more than half of it already claimed on a 12-month view, and closer to two thirds once every future contract year is counted. If that can happen at Beachbody's scale, with auditors and a CFO and quarterly disclosure obligations, it is a reasonable bet the same mechanism is sitting undetected in a $5M brand whose POs live in a spreadsheet nobody nets against the bank balance.

That, incidentally, is why this shows up in 10-Ks at all. SEC disclosure rules require public filers to lay out purchase obligations precisely because a cash balance on its own misleads investors. Nobody makes you do it for your own business. You just get the consequences.

Why DTC brands are exposed to this specifically

Every business has committed spend. Rent, payroll, software. What makes DTC different is the size of the commitment relative to cash, and the length of time between paying it and getting anything back.

Most DTC ecommerce brands run a cash conversion cycle between 60 and 120 days, per Wayflyer's benchmark. That is the gap between cash leaving for inventory and cash coming back from a customer. On the payment side, Flexport describes the standard structure plainly: "Most suppliers require a deposit payment prior to production, with the remaining balance of the invoice due when the inventory is ready to ship." Both of those payments happen before the goods are on a boat, let alone sold.

So the sequence for a DTC brand is: pay a deposit, wait, pay the balance, wait for freight, receive goods, then start selling, then wait again for the payment processor to settle. Every one of those steps is cash out or cash waiting. None of them is cash in. And lead times are not a fixed constant either. A World Bank working paper puts the increase in shipping times from China to the US West Coast at about 40 days between pre-COVID and the start of 2022, and models the disruption as international delivery times stretching from 55 days to 90 days. Either figure is a reminder that the "wait" portion is not something you control.

A lot of the DTC brands I talk to are actively managing that flow, from PO to deposit to receipt to revenue. They know the sequence cold. But almost none of them are subtracting those deposit and balance payments from the cash number they call their runway. The operations side knows about the PO. The finance side is dividing a bank balance by a burn rate. The two numbers never meet.

The other thing that shows up constantly when I open a new set of books: inventory sitting far longer than the founder believes, and a cash conversion cycle stretched well past what they would guess, because the runway math they have been running is still just cash on hand divided by last month's burn. Nobody is being careless. The method just cannot see it.

How thin the buffer already is, before you subtract anything

Now layer this on top of a cushion that was never thick to begin with.

The JPMorgan Chase Institute measured "cash buffer days" across roughly 600,000 small businesses: how many days of normal outflows a business could cover if revenue stopped entirely. The retail median was 19 days. Restaurants, 16. The all-industry median was 27.

The spread matters as much as the median. The bottom quartile of small businesses held fewer than 13 buffer days while the top quartile held over 62, roughly a 5x range. "We have a few months of runway," said out loud, can describe either of those businesses. A separate, larger 2020 JPMorgan Chase Institute study, using a different sample of 1.4 million businesses across 25 metro areas, found 50% of small businesses operating with fewer than 15 cash buffer days. The two studies are not directly comparable, but read together they say the same thing twice: for a lot of small businesses, this cushion was never thick to begin with.

This is the backdrop, not the problem itself. The Federal Reserve's Small Business Credit Survey, fielded in 2024, found 51% of small employer firms citing uneven cash flows and 56% citing paying operating expenses as financial challenges in the prior year, covering small businesses generally rather than DTC specifically. Cash-flow unpredictability is the normal condition of small business. DTC brands then layer inventory-PO timing risk on top of it.

For scale on the stakes: CB Insights' most recent refresh of its startup post-mortem analysis, drawn from 431 VC-backed startups that shut down since 2023, puts "ran out of capital" at the top of the failure list at 70%. That figure moves a lot between report vintages built on different post-mortem samples, with earlier vintages reporting figures in the 29-38% range, so treat the exact number with suspicion, and note the sample is VC-backed startups specifically, not the bootstrapped or lightly-funded DTC brands this post is written for. The ranking is the durable part. Running out of money is the most-cited way this ends, before anyone adds inventory timing to the equation.

A bank balance is a historical fact. Runway is a forward-looking claim. When you divide one by an average and call the answer months of life, you are asserting that nothing you already signed will come due. Your suppliers have a different view, and they have it in writing.

How to build your real runway number this week

None of this requires software. It requires one hour and a willingness to look.

List every open PO. Every purchase order you have signed where cash has not fully left yet. Include the deposit if it has not been paid and the balance in every case. Get it out of the ops system and onto one page. This is usually the step that produces the uncomfortable silence.

Mark each one non-cancelable or not. Read the terms. A PO you can genuinely walk away from at no cost is a choice. Most cannot be walked away from once production starts, which makes them commitments, not plans. Treat anything non-cancelable as cash already gone.

Subtract the total from your bank balance. What is left is your actual available cash. Divide that by your monthly burn. That is your real runway, and it is the number you should be using for hiring and ad spend decisions.

Put dates on it. The single number is a big improvement, but the commitments have due dates and so does payroll. Map them to weeks. When two land in the same week, you have found the constraint that a monthly average was hiding.

Then roll it forward 13 weeks and refresh it every Monday. This is the part that turns a one-time cleanup into a system. Opening cash, minus committed outflows, plus expected receipts, equals closing cash, which becomes next week's opening.

I have been on calls where a founder is genuinely caught off guard, saying some version of "we are going to miss payments this week," because the bank balance told one story and the commitments already on the books told a completely different one. That call is entirely avoidable. The information was never missing. It was just never subtracted.

You do not have 12 months of runway. You have 12 months minus what you already committed to buy. Go find out which.

Related reading. For the same cash and forecasting math applied elsewhere, see why cash and profit diverge on inventory and annual budget vs the 13-week forecast. For how we help brands model margin and cash, see our fractional CFO work.

Sources and methodology

Small-business cash buffer days come from the JPMorgan Chase Institute's analysis of roughly 597,000 businesses. "Cash is King: Flows, Balances, and Buffer Days" (September 2016) defines cash buffer days as average daily cash balance divided by average daily cash outflows, computed from about 470 million anonymized transactions across a sample of 597,000 businesses holding Chase Business Banking deposit accounts, February to October 2015. Retail median 19 days, restaurants 16, all-industry median 27, bottom quartile fewer than 13, top quartile over 62. The full report is published here. A later update, "Small Business Cash Liquidity in 25 Metro Areas" (April 2020), used a different and larger sample (1.4 million businesses across 25 metro areas, versus 597,000 businesses across 367 metro areas in 2016) and found 50% of small businesses operating with fewer than 15 cash buffer days. We report both figures as separate, differently-constructed studies rather than as a time series, because the sample change makes a direct trend claim unsupportable.

The Beachbody figures are quoted from the company's own annual report on file with the SEC, not from any third-party estimate. The Beachbody Company, Inc. (CIK 0001826889), Form 10-K for fiscal year 2023, filed 2024-03-11, SEC EDGAR accession 0000950170-24-029409. Cash and cash equivalents of $33,409,000 at December 31, 2023 (rounded to $33.4 million throughout). The $17.5 million non-cancelable inventory and service purchase commitment figure is from Note 13, Commitments and Contingencies, and is due within 12 months. The $22.8 million enforceable-and-legally-binding lease and purchase commitment figure is from the MD&A Liquidity and Capital Resources section and is an all-years total running through 2028 ($19,177K of purchase commitments across every remaining contract year plus $3,612K of undiscounted lease maturities through 2027, per Note 13 and Note 12 respectively). The two figures use different definitions and different time horizons from the same filing, which is exactly why we report both, and why the 12-month $17.5 million figure, not the all-years $22.8 million figure, is the one that matches this post's runway frame.

The single-company case study is a proof of mechanism, not a benchmark, and should not be read as a typical DTC ratio. Beachbody is a subscription fitness and nutrition business, closer to DTC-adjacent than to an import-heavy apparel or CPG brand. Its 52% and 68% commitment-to-cash ratios are one company's disclosure at one balance-sheet date. No published study we could find quantifies a typical committed-purchase-obligation-to-cash ratio for DTC ecommerce brands specifically, so we have not asserted one.

The DTC timing claims come from named vendor benchmarks, which have a commercial interest in this topic and should be read accordingly. The 60-to-120-day cash conversion cycle range is Wayflyer's published benchmark; Wayflyer sells inventory financing. The deposit-at-PO, balance-at-ready-to-ship payment structure is quoted from Flexport's own guidance; Flexport sells freight and financing. Both figures are real, dated, and attributable, but they are industry benchmarks from interested parties rather than independent academic research. The shipping-time figures are from World Bank Policy Research Working Paper 10303, "The Aggregate Effects of Global and Local Supply Chain Disruptions: 2020-2022", by George Alessandria, Shafaat Yar Khan, Armen Khederlarian, Carter Mix and Kim J. Ruhl, published February 2023. To be precise about what that paper says: the observed figure is that "shipping times from China to the U.S. West Coast rose by about 40 days from pre-COVID to the start of 2022," while the 55-days-to-90-days figures are the paper's calibrated model shock, chosen to mirror that experience rather than being a direct measurement of any single trade lane. We report both and label which is which.

The 13-week cash flow forecast is described as established professional practice because no single canonical report defines it. The methodology (opening cash, minus committed disbursements including purchase orders modeled as forecasted accounts payable, plus expected receipts) is described consistently across treasury, FP&A, and restructuring practitioner sources. We have deliberately not attributed it to a specific dated report, because we could not verify one as the origin. Small-business cash-flow challenge rates (51% citing uneven cash flows, 56% citing paying operating expenses) are from the Federal Reserve's Small Business Credit Survey, 2025 Report on Employer Firms, based on 2024 fielding, and cover small businesses generally rather than DTC specifically.

The worked example is a model, and the startup-failure figure moves between report vintages. The $400,000 cash / $180,000 committed / $60,000 burn example is illustrative. It is built to be reproducible from its stated inputs and is not drawn from any client, sample, or proprietary dataset. The "ran out of capital" failure figure of 70% is from the most recent refresh of CB Insights' startup post-mortem analysis, based on 431 VC-backed startups that shut down since 2023. Earlier vintages, built on different and much smaller post-mortem samples, reported figures in the 29-38% range. The low end is an archived CB Insights report, "The Top 20 Reasons Startups Fail", which analyzed 101 post-mortems and put "ran out of cash" at 29%; we do not attach a publication year to it, because the archived file does not carry one we could verify. The high end is CB Insights' "The Top 12 Reasons Startups Fail" (August 3, 2021), built on 111 post-mortems, which put "ran out of cash / failed to raise new capital" at 38%. CB Insights' own page for that vintage now gates the figures behind a download form and no longer displays the number, so rather than cite a URL that does not show it, we cite contemporaneous reporting of that report by SmartCompany (Stephanie Palmer-Derrien, August 19, 2021): "that was cited as a contributing factor by 38% of founders." So we cite the range, name the samples, and lean on the ranking rather than the point estimate.

Frequently asked questions

how do i calculate my real cash runway including committed purchase orders?

Start with your bank balance, subtract every open purchase order you have signed but not yet fully paid, then divide what is left by your monthly operating burn. The first number is what your bank shows you. The second is what you can actually spend.

what is a 13-week cash flow forecast and do i actually need one?

It is a rolling week-by-week model of opening cash, committed outflows, and expected receipts, used across treasury and turnaround finance. You need one once inventory deposits and payroll get lumpy enough that a monthly average hides a bad week.

why does my bank balance show more cash than i actually have to spend?

Your bank balance only reflects money that has already arrived and settled. It does not net out money you have already promised to a supplier, a landlord, or a tax authority.

should outstanding purchase orders count as a liability when i calculate runway?

For accounting purposes, generally not until you take delivery. For runway purposes, absolutely. If the PO is non-cancelable, the cash is going out whether or not the accounting rules have caught up.

when does a signed purchase order actually turn into a cash outflow?

Usually in two pieces. Most suppliers take a deposit before production starts and the balance when the goods are ready to ship (Flexport). Both payments typically land before you sell a single unit.

what's the difference between burn rate and committed spend?

Burn rate is the ongoing cost of staying open, and it repeats every month. Committed spend is a specific promise you already made, sitting on a specific future date. Burn is a rate; commitments are events.

how many days of cash buffer should a dtc brand actually hold?

There is no published DTC-specific target we would trust. For context, the median retail small business holds 19 cash buffer days and the all-industry median is 27 (JPMorgan Chase Institute). Treat those as a floor, not a goal.

why did my cash run out faster than my runway spreadsheet predicted?

The most common reason we see is that the spreadsheet used an average monthly burn and ignored specific dated commitments. Averages smooth out the exact week a deposit and payroll collide.