Revenue run rate is a financial performance indicator that helps you predict the performance of your SaaS company over the a period of time, usually a year. It uses your current financial information, like present sales and revenue, to forecast your company's performance.
How do you calculate revenue run rate?
Calculating revenue run rate is a two-step equation. First, you will need to determine how often your selected time span occurs in a year. This number becomes your annual time span.
To calculate this, use the following equation.
Number of months or days in a year / Time span of data = Annual time spans
Then you use your annual time spans to calculate your run rate.
(Revenue generated in time span) x (Annual time spans) = Revenue run rate
What is run rate vs ARR?
It’s easy to confuse these two because they share a similar abbreviation. However, Annual Recurring Revenue (ARR) is a SaaS financial metric that only applies to subscription-based business models. Revenue run rate, on the other hand, can be calculated for any business, regardless of its revenue model.
Revenue run rate vs revenue
Remember, your revenue run rate is a prediction of future performance. Revenue is the money you’re actually bringing in currently.
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