Run rate

Definition

A recent short period stretched out to look like a full year.

Why It Matters

A seller quotes it when the last twelve months do not flatter them, and it is legitimate exactly when the change behind it is permanent and already in the numbers: a signed contract, a price rise that has fully landed, a location open all year that was not. It is not legitimate when the recent months are the busy season. The test takes one question and is worth asking every time: what does the figure become if the last three months repeat, and will they?

In numbers: A shop quoting $900k of run-rate revenue off a $225k quarter is annualizing its busiest one; the trailing twelve months read $760k, and the price should follow the smaller figure.