Published: January 2026
Around 80% of Australian SMEs experienced cash flow impact in the last 12 months according to the CommBank 2025 survey. Many report having only six to nine months of runway, and most owners think they have more than they actually do.
There is one number every business owner should know by heart. Not revenue, not profit margin. Your survival number.
This is the minimum monthly revenue required to keep the lights on. Knowing it changes every decision you make, from when you can hire to how long you can survive if things go wrong.
Your survival number is the revenue you must hit to cover all fixed costs plus the minimum you need to pay yourself.
The formula:
(Fixed Costs + Owner's Minimum Draw) ÷ Gross Margin % = Survival Revenue
Here is how to calculate yours:
Step 1: List your fixed monthly costs
Step 2: Add your minimum personal draw: This is not your ideal salary. It is the minimum to keep your household running.
Step 3: Divide by your gross margin: If your gross margin is 50%, you need twice as much revenue to cover your costs.
Example: Fixed costs of $25,000 plus minimum draw of $8,000 equals $33,000 monthly nut. At 50% gross margin, you need $66,000 in monthly revenue just to break even. Below this, you are going backwards.
Runway equals cash reserves divided by monthly burn rate when revenue drops.
But most owners calculate this too optimistically. They use current cash without subtracting money that is not really theirs.
What to exclude from available cash:
Aha moment: Spending GST you have collected is like taking a high-interest loan from the ATO without any paperwork. That money was never yours to spend.
Not all runway is equal. Here is how to interpret your number:
Many Australian SMEs currently report only six to nine months runway. Most owners overestimate their position.
Your runway calculation should assume things go wrong, not that everything continues normally.
Model these scenarios:
If your runway drops below three months in these scenarios, you have less buffer than you think.
Ask yourself: if your biggest client left tomorrow, how many months of runway would you lose?
Many owners believe they are diversified because they have 20 or 30 clients. The maths usually tells a different story:
Aha moment: You might think you have 30 clients. In reality, you have 5 clients and 25 distractions.
Calculate what losing your biggest client would do to your runway. If it cuts your runway in half, you have a concentration problem.
Several changes are putting extra pressure on Australian SMEs right now:
1. Superannuation at 12%: The rate increased from 1 July 2025. This means more cash leaving every pay cycle compared to previous years.
2. GST timing: GST collected sits in your account looking like available cash. It is not yours. Many owners experience a cash crisis every BAS quarter because they spent GST money on operations.
3. ATO debt interest: From July 2025, interest on ATO debt is no longer tax deductible. Carrying ATO debt as a cash management strategy just became more expensive.
Beyond obvious expenses, several factors quietly erode your runway:
1. Debtor days creeping up: If clients used to pay in 30 days but now take 45, you have 15 extra days of revenue trapped. At $1 million annual revenue with 45-day terms, roughly $125,000 is constantly tied up in money you have earned but cannot access.
2. Work in progress: Long projects mean costs incurred before invoicing.
3. Inventory building: Cash tied up in stock waiting to be sold.
4. Equipment purchases: Hit cash immediately but depreciate slowly on P&L.
Key insight: Runway is not static. It shrinks invisibly as debtor days drift and costs creep up. Check it monthly, not quarterly.
Speed up cash in:
Slow down cash out:
Build buffer:
Track weekly: Use Xero's cash summary combined with a 13-week rolling forecast. Many free templates exist for this.
How do I calculate my business cash runway?
Divide available cash reserves (excluding GST and tax provisions) by your monthly burn rate in a downturn scenario. Be conservative in estimates.
What is a good amount of cash runway for an SME?
Six to twelve months is stable. Less than three months is a crisis. More than twelve months gives strategic freedom.
How do I find my survival number?
Add fixed monthly costs plus minimum owner draw, then divide by gross margin percentage to get required monthly revenue.
Why is my cash runway shorter than expected?
Common causes include debtor days blowing out, GST and tax not set aside, superannuation timing changes, and growth tying up cash in receivables.
How often should I check cash runway?
Monthly at minimum. Track cash position weekly using a simple dashboard.
Calculate your monthly nut right now. Fixed costs plus minimum draw, divided by gross margin. Write down the number. That is the revenue you need every single month just to survive.
Scale Suite provides daily visibility into your cash position rather than month-end reports that arrive too late.
We help you calculate your survival number, track runway in real time, and stress test against realistic scenarios. When debtor days creep up or expenses trend higher, you know immediately rather than discovering it at BAS time.
Sources: CommBank SME Survey 2025, ATO (March 2025 update)
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