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Run Rate Definition

run rate – n : annualized revenue; the result of extrapolating recent financial results for a period shorter than one year (e.g., results for the most recent quarter or half year) to represent a full-year period; that is, the result of annualizing recent results. This method is often used to characterize the performance of early-stage, high-growth businesses, since annualizing the revenue run rate of a company based on its latest quarter may be far more impressive (and arguably more representative) of the company’s current status than the potentially far smaller revenue number from its last full fiscal year.

Example: Whereas a startup has produced revenue of $800,000 in the past twelve months, $500,000 of that amount has been generated in the most recent quarter. By annualizing the last quarter’s results (i.e., multiplying that quarter’s results times 4), the company can claim it is generating revenue at a $2 million run rate.

Adapted from "The CompanyCrafters Entrepreneur's Dictionary"
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