Cash runway: how long your practice can keep its promises

Lesson 5 of Owner Number Literacy, the last one. We've covered net after a real draw, pay versus profit, your effective rate, and fully-loaded net per clinician. This one is different in kind: not whether the practice earns, but how long it can survive if earning stopped.

A practice can be profitable and still go under. It's rare and it's slow, but it happens, and the owner is always surprised, because profit looked fine the whole way down.

The number profit doesn't show you is runway: how many months the practice could keep paying everyone (clinicians, rent, you) if revenue stopped tomorrow and only the bills kept coming. It's the difference between a practice that can weather a bad quarter and one that's a single slow month from a hard conversation.

Why profit and runway are different numbers

Profit is a flow: money earned over a period. Runway comes from a pile: money sitting in the account against future obligations. A practice can earn a healthy profit every month and still have almost no runway, because the profit goes out as fast as it comes in: distributed, reinvested, or simply spent.

The reason this matters in a practice specifically is timing. Your obligations are rigid and they're up front. Payroll runs on a fixed date whether or not collections came in that week. Rent is due on the first regardless of caseload. But revenue is lumpy and it lags: insurance pays slowly, clients cancel in clusters, a strong clinician goes on leave, January is always slow. Runway is the buffer that absorbs the gap between rigid obligations and lumpy income. Without it, one bad cluster forces a decision you don't want to make on a timeline you don't control.

The number to find

Runway is two numbers and one division.

Cash on hand: what's actually in the operating account, not what you're owed and not what's coming. Money you could spend today.

Monthly burn: what leaves the account in a normal month. Payroll including your own pay, rent, software, insurance, everything. Total outflow, not profit.

Runway = cash on hand ÷ monthly burn.

If you have $40,000 in the account and burn $20,000 a month, you have two months of runway: two months you could make payroll with zero new revenue. If you burn $35,000, the same balance is barely over one month.

What's enough

There's no universal right answer, but there's a useful floor. In our experience, you feel the difference sharply below two months and sleep noticeably better above three. Under one month, every slow week is a small emergency, and you'll find yourself making decisions driven by the calendar rather than by what's good for the practice: delaying a hire, leaning on a personal account, chasing collections harder than the relationship warrants.

Nobody's arguing for hoarding cash; money sitting idle isn't doing anything either. The goal is enough buffer that timing stops being able to hurt you, so a slow month is an annoyance rather than a threat, and you make every other decision in these five lessons from a position of not being cornered.

How runway ties the series together

This is the last lesson because it sits on top of the others. The first four tell you whether the practice earns: net after a real draw, where your pay ends and profit begins, your true rate, what each seat nets. Runway tells you whether the practice can hold while you act on any of it.

You raise rates from a stronger position with runway behind you. You let a clinician netting below zero get their structure fixed, or let them move on, without panic when you're not one payroll from the edge. Runway is what converts the other four numbers from anxious math into decisions you get to make on your own terms.

One useful exercise

Check your operating balance right now. Estimate what leaves the account in a normal month. Divide.

In our practice we target three months of operating expenses. That lets us weather not just unexpected expenses or gaps but slow months, and even bring on a new clinician, using the reserve as a buffer while we get their caseload going. It's peace of mind, and it protects us financially: if things get rocky, it's the owners' pay that's the shock absorber, not our clinicians' paychecks.

Whatever the number is, you now know it, and you know what it would take to move it. That's the whole point of the series: not perfect figures, but the handful of numbers that turn running a practice from a feeling into a set of decisions you can actually see.

That's Owner Number Literacy, five numbers: net after a real draw, pay versus profit, your effective rate, fully-loaded net per clinician, and cash runway. Together they're most of what it takes to run a practice with your eyes open.

If a number here is one you've never run, that's the place to start. And if you'd rather not build the spreadsheet, the calculator on the Keystone Standard page runs one clinician in about two minutes.

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