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Run Rate is a projection of the next 12 months' revenue based on current data, usually MRR. Unlike Annual Recurring Revenue, it's not limited to recurring revenue and can include one-time sales.
This metric is useful for fast-growing companies to forecast revenue, as using historical data and patterns to forecast revenue can be inaccurate. It provides clarity for budgeting and financial planning purposes and is prevalent in fundraising discussions.
Revenue in Period x Total Periods in Year
To calculate Run Rate, you multiply your revenue for a specific period by the total number of those periods in a year. Iif you're using monthly revenue (MRR), multiply it by 12 to project your Annual Run Rate (ARR).
Use with caution and rely on it mainly for short-term projections; combine it with other revenue metrics like LTV and Churn for a holistic view.
Run Rate isn't applicable to all companies: it's more suitable for SaaS businesses with consistent income streams and may not be accurate for businesses with fluctuating revenues.
