Run Rate

A financial metric projecting annual revenue or expenses by extrapolating current performance over a full year. Typically calculated by annualising recent periods: monthly revenue × 12, or quarterly revenue × 4. For example, $25,000 monthly recurring revenue suggests a $300,000 annual run rate. Run rate provides quick estimates of trajectory and enables comparison across time periods. However, it assumes current performance continues unchanged, ignoring seasonality, growth trends, or market changes. Run rate is most useful for stable businesses with predictable revenue patterns and least reliable during high-growth phases or volatile periods. It's commonly used in startups and subscription businesses tracking momentum.

Why it matters

Run rate provides quick insight into business trajectory and helps set realistic goals. While imperfect, tracking run rate changes reveals whether your business is accelerating, stable, or declining, enabling timely adjustments.