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Revenue Run Rate

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Definition of 'Revenue Run Rate'

The Revenue Run Rate (also runrate - one word) is the annualized revenue of a company if you were to extrapolate the current revenue over a year.

Run rates are useful for new business or business units within a company that have only had a short period of revenue generation opportunity. This figure allows managers, venture capitalists and investors to measure the annualized revenue.

If a business unit were to make $1m in its first month of operation then its revenue run rate would be $12m.

A word of caution: Seasonal revenues will create a deceptive run rate if revenue is measured during the high season.

For example, during the month of October, in the United States, a business that sold Halloween decorations and costumes would have a much higher revenue than in any other month of the year, probably by a magnitude of at least 100. If you were to generate the revenue run rate from October's financial figures for this business then it would overstate the business' annual revenue by large number.

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