Understanding Run-Rate Revenue Simply | Generated by AI
Question: What does run-rate revenue mean?
Answer:
Run-rate revenue (also called annualized run rate or ARR run rate) is a method to estimate what a company’s revenue would be over a full year if the current performance continues at the same pace without any changes.
It is commonly used by:
- Startups and SaaS companies
- Fast-growing businesses
- Companies with recurring revenue
- Companies preparing for fundraising / investor presentations
Main ways to calculate run-rate revenue
-
Most common formula (monthly run rate)
Annual Run Rate (ARR) = Current monthly recurring revenue (MRR) × 12Example:
If a SaaS company has $85,000 MRR in January 2026
→ Run-rate revenue = $85,000 × 12 = $1,020,000 ARR -
Quarterly run rate
Annual Run Rate = Current quarter revenue × 4Example:
Q1 revenue = $320,000
→ Run-rate revenue = $320,000 × 4 = $1,280,000 -
Last month / last week annualized (used very early stage or high-growth)
Last month revenue × 12
or
Last week revenue × 52
Important caveats
- Run-rate is forward-looking and optimistic — it assumes the current month/quarter will continue exactly the same for the next 12 months (no growth, no churn, no seasonality, no big new deals).
- It does not equal actual revenue you will achieve — most companies either beat or fall short of their run-rate projection.
- Investors usually look at both run-rate and actual trailing twelve months (TTM) revenue.
- In SaaS, people often prefer ARR (Annual Recurring Revenue) over simple run-rate because ARR usually only includes committed recurring revenue and excludes one-time fees.
Quick comparison
| Metric | What it shows | Time period | Usually more conservative? |
|---|---|---|---|
| TTM Revenue | Actual revenue last 12 months | Past | Yes |
| Run-rate revenue | If current pace continues for 12 months | Future (projected) | No – usually higher |
| ARR (SaaS) | Annualized committed recurring revenue | Current + future | More conservative than raw run-rate |
In short:
Run-rate revenue = a simple way to say “if we keep performing exactly like right now, this is what a full year would look like.”
References:
- None (standard business/finance term, no specific source needed)