4 ms·
Run rate is about quantities, not rates. If you made $10 in Jan, $40 in July, and $160 in the next Jan, then your run rate would be $1920, (12 x $160), not pro
by pchristensen 16y ago
Run rate is about quantities, not rates. If you made $10 in Jan, $40 in July, and $160 in the next Jan, then your run rate would be $1920, (12 x $160), not projecting 4x growth per 6 months forward.
- beoba 16y agoUsing that math, I've already 'earned' many millions in my lifetime, even though I've only been out of college for a couple years. And that number gets even more exaggerated if I choose to base the calculation off a month where I got a bonus. My point stands; it's fabricated revenue.
- pchristensen 16y agoIt's a well understood and useful concept. Let's say you work at a job making $120K. Then in November, you start a new job paying $180K. Would you think that you make $130K (the amount you actually earned that year) or $180K (the amount you expect to make going forward)? Is the extra $50K fabricated salary? How else would you communicate fast growth in revenue? Also, since run rate is well understood, people don't use it for exceptional or one-time events like a bonus. For example, Groupon didn't claim to be raising money at $12B/yr since the big raise was a one-time event.
- beoba 16y agoIt doesn't communicate growth -- there is nothing to compare against. If you were going to do that, you'd simply provide a something like YOY% change in revenue. A run rate is just inflating/fabricating PAST revenue by speculating on the FUTURE. Refer to my helpful chart: | / <- SHOW THIS NUMBER TO INVESTORS, PRETEND IT WILL GO ON FOREVER | / |/ <- HIDE THIS NUMBER, TOO LOW +---
- tptacek 16y agoWow, a handy ASCII chart that disproves the entire concept of investment. Congrats!