Revenue run rate is the broader cousin of annual recurring revenue. ARR counts only contractually recurring revenue; revenue run rate annualizes whatever mix of revenue you choose to include - recurring, one-time, or both. For most subscription operators it is a useful shorthand for "how big is the business running right now."
How to calculate it
- Monthly run rate - last month's revenue × 12.
- Quarterly run rate - last quarter's revenue × 4. Smoother and less prone to single-month noise.
- Trailing 3-month run rate - average of the last 3 months × 12. The most reliable balance of recency and noise reduction.
Choose the version that fits the situation. Investor decks usually want quarterly. Operating reviews are often more useful with trailing 3-month. Single-month annualizations are easy to game and easy to misread.
What to include and exclude
- Include - recurring subscription revenue, expected portal add-ons, predictable one-time orders.
- Exclude - one-time spikes (Black Friday, viral moments, PR-driven months), refunds in process, and anything you cannot sustain.
The honest run rate represents a typical month projected forward. A holiday-month run rate that gets reported as the steady-state business is misleading communication, even if technically calculated correctly.
Revenue run rate vs. revenue forecast
Run rate is a snapshot. Forecast is a model. Forecast accounts for churn, seasonality, planned price changes, and new acquisition. Run rate just multiplies a recent period forward as if the business will repeat exactly. They serve different purposes and should not be confused - a fundraising deck might quote run rate for scale, but next year's budget needs a forecast.
Why subscription operators like run rate
Because monthly subscription numbers are too small to communicate scale at a glance, and annual numbers take too long to update. Run rate gives a fast, current figure in the language stakeholders understand. Just make sure the period you're annualizing represents reality, not an outlier.