In short
Divide the cash you have by the net monthly burn, which is payments minus receipts, and compare it with the months to your milestone. In the teaching example the cash lasts 6 months, the handover is 8 months away and €200,000 is missing. Decide what to change while there are still months in hand.
What this does not cover. Real months differ: the model assumes constant monthly flows. Check the month by month plan, not only the average.
Three numbers
- Cash now. Money you can actually spend. Retention the client releases only after handover does not count.
- Net monthly burn. Payments minus receipts in an average month.
- Months to the milestone. To an observable result: the site handed over and the certificate signed, not “nearly built”.
Runway = cash ÷ net burn. Shortfall = net burn × months to the milestone − cash.
A teaching example
A made-up general contractor is running a large job. The client pays for each stage 60 days after the certificate and holds back 5% until handover, while the company pays subcontractors and suppliers every month. In an average month €100,000 more goes out than comes in. Handover is 8 months away: that is when the last certificate and the retention come in.
| € or months | |
|---|---|
| Cash now | 600,000 |
| Receipts per month | 350,000 |
| Payments per month | 450,000 |
| Net burn per month | 100,000 |
| Runway | 6 months |
| Months to the milestone | 8 |
| Missing to reach it | 200,000 |
The cash runs out in month six, and the last certificate and the retention arrive only in month eight.
Four levers
- Lower the burn. Which payments can stop or move within a month without putting the handover at risk? For example, pay subcontractors only for the quantities the site manager has signed off.
- Raise receipts. Get each stage certified as soon as it is done, ask for an advance on the new contract, collect the retention on a site already handed over.
- Bring the milestone closer. Hand over in parts if the contract allows it: one building or one phase earlier. A smaller result that still brings in money.
- Raise money earlier. A credit line, or factoring of signed certificates. A bank takes weeks, sometimes months, so start while the runway still covers the search.
What to check
- Is the milestone a result someone outside the company would confirm, such as the client signing the handover certificate?
- By when must a funding decision be taken for the money to arrive in time?
- What happens if the client pays for the stages two months later, or the handover slips by two months?
- Which costs can stop within a month?
DecideWrite down which lever you pick and when you check the runway again