Extend Your Cash Burn

For many business owners, cash flow pressures can come from seasonal changes, economic conditions, or unexpected costs. The key is knowing exactly how long you have before the money runs out, and how to buy yourself more time.

Step 0: Work out your cash zero date

Before making changes, you need to know your starting point.

Here’s how to calculate it:

• Add up your monthly expenses from your cash flow.
• Subtract your monthly revenue to see how much you’re losing each month. Example: Revenue $80,000 – Expenses $100,000 = $20,000 burn rate per month.
• Divide your cash reserves by your monthly burn to get the number of months you have left. Example: $60,000 ÷ $20,000 = 3 months until you hit zero.

The smaller the number, the more urgent it is to act. The four steps below will help you extend your runway.

Step 1: Reduce your burn rate

Cutting costs is often the fastest way to extend your cash runway. This means removing or reducing expenses while keeping your core operations intact.

Ways to cut costs without cutting corners:

• Eliminate non-essential spending such as unused subscriptions, discretionary purchases, and underused services.
• Negotiate with landlords for temporary rent reductions, percentage rent tied to sales, or downsizing your premises.
• Adjust staffing costs by reducing hours instead of jobs, implementing flexible work, or accessing wage subsidies if available.
• Optimize pricing and collections by offering bundles, tiered pricing, or early payment incentives.
• Improve efficiency through automation, lean workflows, and energy savings.

Cost-cutting isn’t about survival alone. It’s about creating a leaner, more agile business that’s better positioned for recovery.

Step 2: Increase your cash reserves

If your reserves are low, focus on topping them up so you have a buffer. This may mean tapping into financing, selling assets, or finding other sources of cash.

Ways to build your reserves:

• Access financing such as business loans, overdrafts, invoice factoring, or peer-to-peer lending.
• Sell excess stock to free up cash and reduce holding costs.
• Apply for government support. The U.S. Small Business Administration is your go-to for federal funded assistance.
• Liquidate underused assets such as vehicles, equipment, or surplus property.
• Add owner capital if the downturn is temporary and recovery is likely.

A healthy reserve gives you breathing space to make strategic decisions rather than reactive ones.

Step 3: Delay payments strategically

Extending your payment timeframes can reduce short-term pressure, but it needs to be done carefully to protect relationships.

Tactics to manage payment timing:

• Switch to interest-only repayments on loans for a short period.
• Negotiate longer supplier terms, for example, from 14 days to 30.
• Prioritize essential suppliers and delay or part-pay others.
• Set up structured payment plans for larger bills or tax obligations.

This won’t remove the debt, but it can create the breathing room you need to stabilize.

Step 4: Create alternate revenue streams

Increasing revenue is a powerful way to offset your burn rate. Look at ways to monetize unused assets, add services, or reach new markets.

Revenue ideas for small businesses:

• Offer variations of existing products to appeal to new customer segments.
• Add complementary services like maintenance, consulting, or subscriptions.
• Monetize assets by renting equipment or licensing intellectual property.
• Enter new markets locally, interstate, or online.
• Collaborate with other businesses to co-create offerings and share customer bases.

The goal is to diversify your income so you’re not dependent on a single revenue source.

Step 5: Monitor and adjust regularly

Managing your cash burn rate isn’t a one-off exercise. Market conditions, customer behavior, and expenses can change quickly, so your strategy needs to evolve too.

Ways to stay on top of your cash flow health:

• Review your numbers monthly. Track revenue, expenses, and cash reserves against your burn rate.
• Use forecasting tools to model best-case, worst-case, and most-likely scenarios.
• Set trigger points, e.g., if reserves fall below a certain amount, certain cost-cutting measures automatically kick in.
• Check in with advisers, as your accountant, bookkeeper, or business coach can help you spot risks early.

Consistently monitoring your burn rate ensures you can act before small issues become serious problems, keeping your business financially healthy over the long term.

Why it matters

Your cash burn rate is more than just a financial metric. It’s your business’s runway. The longer that runway, the more time you have to adapt, innovate, and seize opportunities without being forced into rushed decisions. Extending your burn rate gives you breathing room to ride out slow periods, invest in growth at the right moment, and secure funding from a position of strength rather than desperation. In short, a healthy burn rate keeps you in control of your business’s future.

Extending your cash burn rate is about giving yourself the time to make smart, sustainable choices. When you reduce costs, build reserves, manage payments wisely, and diversify your revenue, you can strengthen your position today and set your business up for tomorrow.

Next Steps

• Run the numbers today. Calculate your cash zero date and update it regularly so you always know where you stand.
• Use the right tools. Explore our calculators and tools for small businesses to forecast, budget, and scenario-plan more accurately.
• Book a strategy session. Meet with your accountant or business adviser to map out a 3–6 month action plan tailored to your industry and situation.
• Build a habit of review. Set a monthly financial health check in your calendar to track progress and adjust before issues escalate.

*These resources are guides only and should neither replace competent advice, nor be taken or relied upon as financial or professional advice.