Revenue Run Rate vs ARR: Key Differences for SaaS Founders

~1 min read

The confusion between run rate and ARR is common — especially for SaaS companies in early stages where the distinction matters most.

ARR: Annual Recurring Revenue

ARR = Current MRR × 12

ARR is based on contracted, recurring subscription revenue. It represents the forward-looking annual value of your current subscription base — only counting revenue you have under contract.

ARR excludes: - One-time setup fees - Professional services - Non-recurring revenue - Expired contracts

Run Rate: Annualized Actual Revenue

Run Rate = (Period Revenue / Months) × 12

Run rate annualizes whatever revenue actually came in — recurring, one-time, or otherwise. It's a simpler, more general calculation.

Which to use?

Scenario Use
Pure SaaS subscription reporting ARR
Non-subscription business Run Rate
Mixed model (subscriptions + services) Both, separately
Investor pitch deck ARR (more rigorous)

For pure SaaS: always lead with ARR. Use run rate as secondary context.

Calculate run rate at the Revenue Run Rate Calculator and ARR at the ARR Calculator.

Calculate it yourself — free

Use our free Revenue Run Rate Calculator to run the numbers for your own business.

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