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Revenue Run Rate is a financial metric used to extrapolate a company's current revenue over a longer period (typically a year) based on its performance during a specific period (like a month or quarter). This metric is particularly useful for rapidly growing companies to project future revenue and for businesses to gauge the impact of recent changes in their operations or market conditions.
Calculating Revenue Run Rate is a straightforward process using the following formula:
Run Rate = Revenue in Period / # of Days in Period x 365
Revenue Run Rate can serve as a quick health check for businesses, indicating whether current strategies are aligning with financial expectations. For instance, a high run rate might suggest effective market penetration and growth, while a sudden drop could signal problems requiring strategic reassessment. Companies like DocuSign have used this metric to demonstrate potential annual growth based on quarterly earnings.
When analyzing Revenue Run Rates, it's important to consider:
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