Definition of Revenue Run Rate

What is the definition of the term "revenue run rate"? What does the term "revenue run rate" mean?

"Revenue run rate" is when you take the amount of revenues that a company generated over a short period of time (say, one month) and extrapolate it over a longer period of time (usually a year). With this calculation, you are assuming that conditions will continue over the next year.

The illustration to accompany the description of the term Revenue Run GrowthFor instance - let's say that I own a company and it just generated $3 million in revenues during the month of April.

If I am assuming that conditions remain steady, my revenue run rate would be $36 million, as I would be assuming that my company would generate $3 million in revenues each month for the entirety of the year.

Revenue run rate numbers are often trumpeted by high growth companies that are far removed from posting profits. If you read the prospectuses of quickly growing technology companies that are readying an IPO, chances are that they will be very focused on their revenue run rate.

Revenue run rate numbers can be deceiving, as they don't take into account a number of different factors, such as seasonality. For instance, if I run a store and generate $1 million in sales in the month of December, do you think that it would be an accurate picture if I said that my revenue run rate was $12 million?

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