Run Rate
Run Rate: Run rate is a financial metric used to project a company’s future performance based on its current Revenue or earnings. It extrapolates the financial results of a specific period (often a month or a quarter) to estimate annual performance, assuming that current conditions remain constant.
Examples:
- If a company earns $500,000 in Revenue in Q1, its annual run rate would be $500,000 x 4 = $2,000,000.
- A startup that generates $100,000 in monthly recurring Revenue (MRR) would have an annual run rate of $100,000 x 12 = $1,200,000.
Cases:
- Run rate can be particularly useful for subscription-based businesses where consistent Revenue is expected.
- It can help investors gauge the growth potential of a company by comparing run rates over different periods.