Run-Rate Revenue

Run-rate revenue is common among fast-growing companies, especially start-ups, because their most recent results may be much higher than their revenue for the last full year.

For example, a company with revenue of 2,000,000 in its most recent month has an annual run-rate of 24,000,000, even if its revenue for the previous twelve months was only 15,000,000.

Run-rate figures can be useful for understanding the current scale of a business. But they can also mislead. A strong month may reflect seasonal sales or one-off deals rather than a sustainable level. Projecting a single good month can overstate annual revenue, while projecting a weak month can understate it.

Investors should check which period the run-rate is based on and whether the revenue is recurring. Run-rate revenue differs from annual recurring revenue, which includes only contracted subscription revenue, although the two are sometimes confused.