A-Z Popular Blog Metrics Search »
Related Guides
Management Theory

Related Topics
Management Functions

Change Management

6 Examples of a Run Rate

 , updated on
A run rate is a forecast based on extrapolating current results into the future. This can be applied to revenue, cost, financial and operational metrics to approximate future results. The following are illustrative examples.

Annual Run Rate

It is common for firms to calculate an annual run rate for revenue based on the most recent quarter. This is useful when a firm is growing such historical results aren't as useful as the most recent quarter in estimating next year's revenue. For example, a firm that produced $12 million gross revenue in the current quarter may calculate an annual run rate as follows.
Annual Run Rate = quarterly revenue × 4
= $12 million × 4
= $48 million

One-time Revenue

A firm may exclude one-time revenue from its run rate to obtain a more conservative and realistic view of future revenue. For example, a firm generates $10 million in a quarter from recurring revenues and $40 million from a one-time project that is unlikely to recur. They exclude the one-time revenue to calculate run rate as:
Annual Run Rate = quarterly recurring revenue × 4
= $10 million × 4
= $40 million

Seasonal Revenue

A company that has strong seasonal patterns in its revenue doesn't typically calculate a run rate based on the most recent quarter. For example, a retailer that generates 50% of its revenue in the months leading up to Christmas will base its run-rate on its trailing 12 months revenue of $30 million.
Annual Run Rate = trailing 12 months revenue
= $30 million

Net Revenue

Run rate can be used to estimate future profitability. For example, a delivery service that is growing quickly had $10 million in revenue and $8 million in expenses in the most recent month can calculate its net revenue run rate as:
Annual Run Rate (Net) = (monthly revenue - monthly expenses) × 12
= ($10 million - $8 million) × 12
= $24 million


Run rate can be calculated for all costs incurred by a business or a particular category of cost. For example, an ecommerce company is considering launching its own delivery service. As part of the decision making process they calculate the run rate for delivery costs based on the most recent monthly cost of $56 million.
Annual Run Rate (Cost) = monthly cost × 12
= $56 million × 12
= $672 million


Run rate can be calculated for a wide range of financial or operational metrics that you want to estimate based on current results. For example, a procurement team estimates the amount of coffee they will need to order next year for office coffee services from the current monthly usage of 450 pounds of coffee.
Annual Run Rate (Coffee) = current monthly usage × 12
= 450 pounds × 12
= 5,400 pounds


A run rate is a future forecast that simply assumes current conditions continue into the future.
Overview: Run Rate
An estimate based on extrapolating current results into the future.
Related Concepts
Next: Financial Analysis
More about financial analysis:
Best In Class
Complexity Cost
Cash Conversion Cycle
Cycle Time
Compliance Rate
Employee Productivity
Contribution Margin
Cost Benefit Analysis
Labor Productivity
Cost To Company
Lead Time
Run Rate
Statistical Analysis
Demand Forecasting
Takt Time
Efficiency Formula
Internal Benchmarking
Lifecycle Cost Analysis
Machine Efficiency
Net Present Value
Productivity Formula
Productivity Rate
Target Costing
Theory Of Constraints
Throughput Accounting
Total Cost Of Ownership
Variance Analysis
If you enjoyed this page, please consider bookmarking Simplicable.


An reasonably comprehensive list of metrics.

Process Metrics

The common types of process metric.

Performance Metrics

A list of common performance metrics for businesses, programs and employees.

Annual Contract Value

The definition of annual contract value with calculation examples.

Response Time

The definition of response time with examples.

Status Report

An overview of status report with full examples.

Success Factor Definition

The definition of critical success factor.

Critical Success Factors

A few examples of critical success factors.

Performance Analysis

An overview of performance analysis with examples.


A few examples of benchmarking.

Management Accounting

A list of management accounting examples.

Theory Of Constraints

A management approach that examines the constraints that are holding an organization back.

Target Costing

A definition of target costing with examples.

Continuous Improvement

A definition of continuous improvement with examples.

Takt Time

An overview of takt time with calculation formula and example.

Lead Time vs Cycle Time

The difference between lead time and cycle time explained with an example.

Productivity Formula

How to calculate productivity with 3 examples.

Complexity Cost

A definition of complexity cost with examples.

Managerial Economics

The definition of managerial economics with examples.
The most popular articles on Simplicable in the past day.

New Articles

Recent posts or updates on Simplicable.
Site Map