Forecast your annual performance based on recent data.
Days
Weeks
Months
Quarters
Annual (1 Year)
Quarterly (3 Months)
Estimated Annual Run Rate
$0.00
How to Calculate Run Rate: A Complete Guide
The run rate is a financial method used to predict the future performance of a company by extending current financial data over a longer period. It is most commonly used to calculate the Annual Run Rate (ARR), which takes a short snapshot of revenue (like a single month or quarter) and projects it out to show what the next 12 months would look like if performance remains steady.
The Run Rate Formula
To calculate the run rate, you divide the revenue earned in a specific period by the length of that period, then multiply by the total number of periods in a year.
Annual Run Rate = (Revenue in Period / Duration of Period) × Total Periods in Year
Examples of Run Rate Calculations
Scenario
Current Revenue
Period
Annual Run Rate
Startup Month 1
$10,000
1 Month
$120,000
Q2 Performance
$250,000
1 Quarter
$1,000,000
Holiday Week
$15,000
1 Week
$780,000
Why Calculate Run Rate?
Forecasting for Startups: Early-stage companies often use run rates because they don't have years of historical data to look back on.
Measuring Growth: If your monthly revenue increases from $5k to $10k, your run rate effectively doubles, showing the impact of recent scaling.
Budgeting: It helps managers understand if they are on track to meet annual targets based on current momentum.
The Risks of Using Run Rate
While helpful, the run rate has limitations. It assumes that market conditions, seasonal fluctuations, and customer churn remain constant. For example, a retail business shouldn't use its December revenue (Holiday peak) to calculate an annual run rate, as it would likely overstate the actual yearly performance.
function calculateRunRate() {
var revenue = parseFloat(document.getElementById('periodRevenue').value);
var duration = parseFloat(document.getElementById('periodDuration').value);
var unit = document.getElementById('durationUnit').value;
var target = document.getElementById('projectedPeriod').value;
var resultDiv = document.getElementById('rrResult');
var valueDiv = document.getElementById('rrValue');
var labelDiv = document.getElementById('rrLabel');
var explanationDiv = document.getElementById('rrExplanation');
if (isNaN(revenue) || isNaN(duration) || duration <= 0) {
alert('Please enter valid positive numbers for revenue and duration.');
return;
}
var annualMultiplier = 0;
var unitName = "";
// Convert duration to annual factor
if (unit === 'days') {
annualMultiplier = 365 / duration;
unitName = "days";
} else if (unit === 'weeks') {
annualMultiplier = 52 / duration;
unitName = "weeks";
} else if (unit === 'months') {
annualMultiplier = 12 / duration;
unitName = "months";
} else if (unit === 'quarters') {
annualMultiplier = 4 / duration;
unitName = "quarters";
}
var annualRunRate = revenue * annualMultiplier;
var finalResult = annualRunRate;
var displayLabel = "Projected Annual Run Rate";
// If user wants quarterly projection
if (target === 'quarter') {
finalResult = annualRunRate / 4;
displayLabel = "Projected Quarterly Run Rate";
}
// Formatting the number
var formattedResult = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
}).format(finalResult);
// Display results
labelDiv.innerHTML = displayLabel;
valueDiv.innerHTML = formattedResult;
var timeFrameText = target === 'annual' ? "12 months" : "3 months";
explanationDiv.innerHTML = "Based on earning " + new Intl.NumberFormat('en-US', {style: 'currency', currency: 'USD'}).format(revenue) + " over " + duration + " " + unitName + ", your projected revenue for the next " + timeFrameText + " is " + formattedResult + ".";
resultDiv.style.display = 'block';
}