What is Run rate?
A trailing period's revenue annualized to a full year — the forward-looking size of the business.
Run rate answers "at this pace, how big is the business?" — it takes revenue from a recent window and annualizes it to a full-year figure. Board decks and investor updates quote it when they want one number for the current size of the business, distinct from last year's actuals or the budget frozen in January.
The convention that survives scrutiny is a trailing window, annualized: average the last three months, multiply by twelve. Last-month × 12 is also a run rate, but one big deal or one bad month flows straight through into the full-year number — trailing windows dampen that noise. The longer the window, the smoother (and slower) the number reacts.
Run rate is a pace, not a forecast. It assumes the next nine months look like the last three, with no seasonality, churn, or pipeline factored in. It's the honest number for "where are we," and the wrong number for "where will we land" — that's a rolling forecast.
Formula
Run rate = average monthly revenue over a trailing window × 12
The common trailing-3-month version is avg(last 3 months) × 12 — equivalently the 3-month total × 4. A trailing-twelve-month (TTM) version is the same template with a 12-month window.
The Sumwise question
Calculate the annualized run rate from monthly revenue: revenue by month, the trailing 3-month average, and the annualized run rate (trailing 3-month average × 12), latest month first.
Runs on monthly_revenue.csv. The same sample the run-rate live demo runs on — nine closed months (Jan–Sep 2026) of revenue by segment.
Worked example — monthly_revenue.csv
| Revenue, July 2026 | $566,600 |
| Revenue, August 2026 | $573,000 |
| Revenue, September 2026 | $585,200 |
| Trailing 3-month average (per month) | $574,933 |
| Annualized (× 12) | $6,899,200 |
| Naive last-month × 12 (the trap) | $7,022,400 |
The trailing 3-month run rate is $6,899,200 — a $6.9M pace. Last month × 12 would claim $7.0M: letting one strong September speak for the whole year.
monthly_revenue.csv — drop it into the demo's Your-own-CSV tab (or Excel) and re-run the example.
Common questions
Is run rate the same as ARR?
No. ARR counts only contracted recurring revenue; run rate annualizes whatever revenue the trailing window contains — one-off services, deals and all. A SaaS company's ARR is usually well below its total-revenue run rate.
Which window should I use — 1, 3, or 12 months?
Three months is the common board-deck convention: long enough to smooth a single deal, short enough to reflect this quarter's pace. Twelve months (TTM) is better when the business is seasonal — a 3-month window that straddles a peak misrepresents the year.
Can run rate be computed on costs too?
Yes — cost run rate is the same formula on expenses, and it's how you sanity-check "are we burning more than the plan assumed?" Any monthly series annualizes the same way.
Compute run rate on your own export, every month
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Related terms
ARR
Annual recurring revenue — the yearly value of active recurring contracts, usually MRR × 12.
Rolling forecast
Actuals for closed months plus a re-cut forecast for the rest of the year — same horizon, refreshed every cycle.
Year-over-year growth
Change versus the same period last year — (current − prior) ÷ prior, the growth measure that cancels seasonality.