Enter the total revenue per period and the total period per year into the calculator to determine the run rate of the company or SaaS.
Run Rate Formula
The following formula is used to calculate a run rate.
RR = RP * PPY
- Where RR is the run rate ($/year)
- RP is the revenue per period ($)
- PPY is the periods per year ($)
Run Rate Definition
What is a run rate? A run rate is defined as the total annual revenue earned by a business. Typically, run rate is used when analyzing SaaS (software as a service) businesses.
Run Rate Example Problem
How to calculate a run rate?
- First, determine the total revenue per period.
For this example, we are analyzing a SaaS that has a total revenue of $500,000.00 per quarter.
- Next, determine the total period per year.
Since we have revenue per quarter, we know that there are 4 total financial quarters in a year.
- Finally, calculate the run rate.
Using the formula, we determine the run rate to be: 500,000 * 4 = $2,000,00.00 per year.
Run Rate Information
What is run rate used for? A run rate is used to financial modeling to predict the future revenue of a company of a time period of longer than the current period. So, if we know the revenue for any period, we can extrapolate the projected revenue for a say a year or more.
Is run rate revenue? Run rate is a measure of revenue per year.