Forecasts and runway

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Budget and forecast

A budget is the plan: what the studio means to spend and earn this year. A forecast is today's best guess of what will really happen, updated every month.

Cash, when it arrives

The British Business Bank: "You use a cash flow forecast to predict the cash that's going out of your business and coming back in over a specific period." Income goes in "for when you know clients will pay invoices, or bank payments will clear."

Quick check

A store pays Shard Garden for March's sales at the end of April. When does Theo put that money in the cash forecast?

  1. At the end of April, when it arrives
  2. In March, when players bought
  3. Never
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At the end of April, when it arrives

A cash forecast follows the money into the bank, not the sale.

Further is fuzzier

The same guide: "the further out you go, the less accurate your predictions are likely to be." Theo forecasts month by month for a year, and updates it every month. Each month, the team compares what happened with the budget: spending 20% over in one area is a question to answer, not a crime.

Read the forecast

cash forecast, cash at month end
Month     In   Out     CashJan     200k  250k   1,450kFeb     200k  250k   1,400kMar     150k  250k        ?

What is the cash at the end of March?

  1. 1,300k
  2. 1,350k
  3. 1,400k
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1,300k

1,400k + 150k - 250k = 1,300k.

Months of money

Burn is how much more a studio spends than it earns each month. Runway is how many months the money in the bank lasts at that burn.

Theo's forecast has three versions: expected, good and bad. If the bad one runs out of money, the studio acts now, not when it happens.

Do the math

Shard Garden
bank         1,800,000spend/month    300,000earn/month     200,000

How long is the runway?

  1. 18 months
  2. 6 months
  3. 9 months
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18 months

Burn is 100,000 a month. 1,800,000 ÷ 100,000 = 18.

Default alive?

In October 2015, Paul Graham asked of startups: "Assuming their expenses remain constant and their revenue growth is what it has been over the last several months, do they make it to profitability on the money they have left?" Yes is default alive. No is default dead.

Theo puts the answer on the first slide of every board meeting. Raising money takes months, so Shard Garden starts talking to investors with 12 months of runway left, never with 3.

Quick check

Theo sees Shard Garden's income grow a little each month, but on current trends the money runs out before income catches up with spending. Which is it?

  1. Default dead, unless something changes
  2. Default alive
  3. It can't be known
Show the answer

Default dead, unless something changes

On current trends it doesn't reach profit on the money it has. Something must change.

Stretch the runway

Four plans. One gives the board the 24 months it asked for.

Bolt says: Next: how long is the runway?

Fact-checked 12 October 2026