Run rate

Run rate takes a recent slice of activity and projects it forward as if conditions stayed the same. A consultancy that booked 1.6 million dollars of revenue in the most recent quarter has an annualized run rate of 6.4 million. A project that is consuming 80 hours per week against a 1,200-hour budget has a run rate that exhausts the budget in 15 weeks. The number is a quick sanity check, not a forecast.

The honest use of run rate is as a baseline that the actual forecast can adjust against. Leadership compares the run rate to the demand forecast and notes the gap, then attributes the gap to known events such as a closing renewal, a planned hire or a project ending. When the run rate and the forecast disagree without a clear story, that is the signal to dig deeper before a planning cycle commits to either number.

Related: burn rate, demand forecasting, executive horizon.