Run Rate Calculation Formula

Run Rate Calculator

One Month One Quarter (3 Months) Custom (Year-to-Date)

Projected Performance

Annual Run Rate: $0.00

Monthly Average: $0.00

function toggleMonthsInput() { var period = document.getElementById('periodType').value; var container = document.getElementById('customMonthsContainer'); if (period === 'custom') { container.style.display = 'block'; } else { container.style.display = 'none'; } } function calculateRunRate() { var revenue = parseFloat(document.getElementById('currentRevenue').value); var periodType = document.getElementById('periodType').value; var annualRunRate = 0; var monthlyAvg = 0; if (isNaN(revenue) || revenue <= 0) { alert("Please enter a valid revenue amount."); return; } if (periodType === '1') { annualRunRate = revenue * 12; monthlyAvg = revenue; } else if (periodType === '3') { annualRunRate = revenue * 4; monthlyAvg = revenue / 3; } else if (periodType === 'custom') { var months = parseFloat(document.getElementById('monthsElapsed').value); if (isNaN(months) || months 12) { alert("Please enter a valid number of months (1-12)."); return; } monthlyAvg = revenue / months; annualRunRate = monthlyAvg * 12; } document.getElementById('annualRunRateResult').innerHTML = '$' + annualRunRate.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('monthlyAverageResult').innerHTML = '$' + monthlyAvg.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('resultArea').style.display = 'block'; }

Understanding the Run Rate Calculation Formula

A run rate is a financial forecasting method that predicts the future performance of a company by extrapolating current financial data. It is most commonly used by startups and rapidly growing businesses to estimate annual revenue when they do not yet have a full year of historical data.

The Basic Run Rate Formula

The core logic of a run rate calculation is simple: take the revenue from a specific period and multiply it to cover a full year (12 months).

• Monthly Run Rate: Monthly Revenue × 12
• Quarterly Run Rate: Quarterly Revenue × 4
• YTD Run Rate: (Year-to-Date Revenue ÷ Months Elapsed) × 12

Calculation Example

Imagine a new SaaS company that earned $15,000 in its third month of operation. To find the annual run rate:

$15,000 (Current Month) × 12 months = $180,000 Annual Run Rate.

This tells investors that if the current performance remains constant, the company is on track to earn $180,000 over the next year.

When to Use This Calculator

The run rate is an essential metric for:

1. Early-Stage Startups: When you only have 3 or 4 months of data but need to present annual projections to VCs.
2. Major Pivot Tracking: If a company changes its business model, the run rate helps visualize the impact of the new strategy immediately.
3. Internal Goal Setting: Helping sales teams understand the pace required to hit end-of-year targets.

The Limitations of Run Rate

While useful, the run rate formula has significant limitations. It assumes that market conditions, seasonality, and growth remain static. For example, a retailer's run rate based on December sales (holiday peak) would vastly overestimate the total annual revenue. Always consider seasonality and churn rates when analyzing these figures.