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Run rate is an annualized estimate of revenue based on a shorter period's actual results. It's widely used when you don't have a full year of data — at a company's early stage, after a major shift, or when reporting partial-year results.
The formula
Annual Run Rate = (Period Revenue / Period Months) × 12
At $250k revenue over 3 months: ($250k / 3) × 12 = $1,000,000 ARR run rate.
Run rate vs ARR
In SaaS, ARR (Annual Recurring Revenue) is calculated from your current MRR: ARR = MRR × 12. This is precise and based on contracted recurring revenue.
Run rate is a more general term for any revenue annualized. It can apply to total revenue (including one-time), service revenue, or transactional revenue — not just subscription revenue.
For pure SaaS businesses: use ARR, not run rate. ARR is more accurate because it's based on contracted recurring revenue, not a period average that may be skewed by seasonality or one-time items.
For non-SaaS businesses: run rate is the correct term.
When run rate is misleading
Seasonality: A retailer who earns $500k in December but annualizes to $6M ARR is not a $6M/year business.
Growth periods: Annualizing January revenue when you're growing 10% MoM will significantly understate full-year revenue.
One-time items: Large consulting contracts or one-time sales inflate run rate without representing sustainable recurring revenue.
Use compound growth rate projection for growing businesses — the calculator supports this with the optional monthly growth rate input.
Frequently asked questions
What does this calculator do? Calculate annual run rate from any period's revenue, with optional compound growth projection to estimate forward revenue.