Revenue run rate (or sales run rate) helps project future earnings based on current performance.
By annualizing weekly, monthly, or quarterly revenue, companies can estimate future income and use that baseline to guide strategic decisions. It’s a quick way to understand revenue momentum—especially in fast-growing or early-stage businesses.
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It’s important not to confuse revenue run rate with annual recurring revenue (ARR). While ARR tracks predictable revenue from active contracts, the revenue run rate is a projection based on your current earnings—often used by newer or fast-growing companies to estimate future income.
Run rate can be a helpful planning tool, but it’s not a fit for every scenario. It relies heavily on recent data, so if your business is growing quickly, using only the most up-to-date figures gives you the best shot at an accurate forecast.
That said, the revenue run rate has limitations—especially when changes are on the horizon. A new pricing strategy, product launch, or shift in customer behavior can make those projections less reliable.
Here are a few other caveats to keep in mind:
- Seasonality. Run rate assumes your revenue is spread evenly throughout the year, which doesn’t account for seasonal spikes or dips.
- One-time sales. A large, one-off deal in a given period can distort the run rate and inflate projections.
- New product releases. Sales may temporarily surge after a new launch, then stabilize. If you base your forecast on that surge, the run rate will likely overestimate your future revenue.
- Upcoming renewals. If many contracts are nearing renewal—or potential churn—the run rate won’t reflect that. Without factoring in retention or renewal rates, projections may overstate how much revenue you can actually count on.
In short, revenue run rate is useful for directional planning, but it works best alongside other metrics that capture retention, growth trends, and seasonality.
How to calculate revenue run rate
To calculate the revenue run rate, take the total current revenue in your given period and divide that by the total number of days in that period. Multiply the result by 365 to find the annual run rate.
Since this calculation produces an annual figure, this is also known as data annualization.
Revenue run rate examples
To get a sense of what your revenue run rate calculations might look like, here are some examples:
Suppose you’re a new email marketing SaaS business. And in the last week, you generated $14,000.
To find how much your company might make in a year at this rate, divide this number by 7 days to get $2000. Then, multiply that number by 365 for the days in the year to get $730,000.
In other words, your annual revenue run rate is $730,000.
You can also find your annual revenue run rate by multiplying the revenue in your given period by the number of said periods in a year. You can do so on a monthly basis or after the first quarter.
Suppose the same business generated $60,000 in revenue in one month. To find your revenue run rate, multiply the $60,000 number by 12, the number of months in a year.
You’ll get $720,000. Put differently, your annual revenue run rate with this method is $720,000.
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How revenue run rate and annual recurring revenue (ARR) are different
While revenue run rate and ARR are both annualized metrics, they’re not the same.
ARR (annual recurring revenue) reflects the total value of active subscription contracts in a SaaS business. It’s based on revenue you can reasonably expect—because it’s tied to signed agreements—making it a more reliable predictor than run rate, especially for companies with a recurring revenue model.
Revenue run rate, on the other hand, projects annual revenue based on recent performance, regardless of whether it’s contracted.
It’s also worth noting that ARR excludes one-time purchases or setup fees, so it doesn’t capture your full revenue picture. That’s why ARR is most useful for tracking long-term growth and recurring performance in subscription-based businesses.
Key takeaways
- Revenue run rate is a financial metric that helps businesses project future earnings by annualizing current revenue over a period, providing a baseline for strategic planning
- It is particularly useful for fast-growing companies to gauge potential revenue, but it has limitations, such as not accounting for seasonality, one-time sales, or changes in business strategy
- The formula involves taking the current period’s revenue, dividing it by the number of days in that period, and multiplying by 365 for an annual projection
- Revenue run rate differs from annual recurring revenue (ARR), which only accounts for subscription-based income, offering a more stable revenue prediction for SaaS businesses
- Companies use revenue run rate for various purposes, including projecting future revenue, securing funding, tracking strategic changes, and managing resources effectively
When to use revenue run rate
So why would you calculate your revenue run rate? There are several scenarios:
Projecting future revenue
An estimate of your yearly revenue is a useful planning tool for finance teams and businesses to benchmark against. It can help determine if there will be enough cash to cover planned endeavors.
Early-stage SaaS companies typically see as much as 68 percent growth in their first year, or 4.4 percent growth in monthly recurring revenue (MRR) each month.
Frequently calculating your revenue run rate can also help you track growth and more accurately predict your company’s performance.
Securing funding
A huge part of running a successful business is simply being able to prove financial health and success. The revenue run rate can give a more approachable projection that can indicate positive future financial performance and success to investors.
In other words, along with your cash flow, net revenue retention, expenses, and other projections, you can use the revenue run rate to convince a potential investor to put money into your business.
Track strategic change
Before you make significant strategic, financial, or product changes, calculate your revenue run rate. Your revenue run rate can act as a baseline figure to see whether the changes increased the revenue.
For example, suppose you want to introduce a new product that may be more expensive to produce but could draw in a new business segment. Tracking your overall revenue changes will help you visualize whether introducing the new product affects your income.
Manage resources
Tracking projected annual sales helps you manage necessary business operations. With an idea of how much volume your business will handle, you can stay on top of your inventory, secure enough team members, and more.
Revenue run rate FAQs
How is revenue run rate different from ARR?
Revenue run rate (RRR) and annual recurring revenue (ARR) are different in that ARR includes only recurring revenue while RRR includes any revenue. ARR is used for subscription-based purchases during a period of time and does not include one-time purchases.
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What is the formula for revenue run rate?
The revenue run rate formula is as follows:
- RRR= revenue in period x number of periods on a year
What is a good revenue run rate?
This is dependent on your business: a startup will have a much different RRR than an established corporation, so there is no “good” revenue run rate for everyone. That being said, since RRR projects your current revenue into the future, a minimal baseline annual run rate is one that exceeds annual cost of revenue if you’re aiming for profitability.
