What is run rate?
Run rate is current performance extended over a full year, such as last month's revenue times 12. It helps compare periods and estimate where a business is heading, especially after a change such as an acquisition or a large new contract. It assumes the starting period is typical, which is its weak point: seasonality, one-off jobs and lost customers all distort it.
Why it matters to a revenue leader
Run rate shows up in board decks and deal discussions, often flattering the numbers. A services company with a strong summer, or one large project billed in a single month, can quote a run rate it will not sustain. For a revenue leader, the more honest version is a recurring run rate: contracted monthly revenue from agreements times 12, leaving out one-time work. Sponsors trust a run rate more when it is built that way.
How to calculate it
Run rate = revenue for the period times the number of such periods in a year (monthly times 12, quarterly times 4). A common mistake is annualizing a period that includes one-time revenue or a seasonal peak.
Example
Fictitious numbersA mechanical services company bills $2.4 million in July, including a $400,000 one-time chiller job. The headline run rate is $28.8 million. Excluding the one-time job, the run rate is $24 million.
"What share of the run rate we quote comes from recurring agreements?"
Sources
- Revenue Run Rate (Corporate Finance Institute) checked 9 Oct 2026