What is Run Rate?
Nexa Consultancy | Startup & Finance Glossary
Run Rate is a forecasting method that extrapolates recent financial performance over a longer period. For example, if a company has revenue of ₹1 crore in a quarter, its annual run rate is projected to be ₹4 crore. It provides a simple, high-level projection of future performance based on current momentum.
For Startups: Founders often use run rate to describe their current scale to investors (e.g., "We are at a ₹4 Crore ARR run rate"). However, it's a very simplistic measure and should be used with caution, as it doesn't account for seasonality, churn, or market changes. A more detailed financial forecast is always preferred for internal planning and investor diligence.
Calculation: Annual Run Rate = Revenue from Latest Period * Number of Periods in a Year.
Example: A SaaS company achieves ₹20 Lakhs in MRR in June. Its Annual Recurring Revenue (ARR) run rate is ₹20 Lakhs * 12 = ₹2.4 Crore.