Why run rate is the floor a forecast should be compared to rather than a forecast itself, what the gap between the two is made of, new business, expansion, churn, seasonality and known changes, the bridge from run rate to forecast with a line for each, the forecast that sits below run rate and needs a reason, the one far above it and needs pipeline, and the rule that the forecast is defended by the lines between it and the floor.
A sales leader presents a forecast. The CFO asks what run rate is. If the two are close, the forecast is credible; if they are far apart, the CFO wants the gap explained line by line. This guide sets out run rate as the floor, the five lines between it and the forecast, and the bridge that defends the number.
Run rate = revenue in the window ÷ window length × period length, window stated
What happens if nothing changes. Not a forecast; the reference.
| Line | Source | Sign |
|---|---|---|
| New business | Weighted pipeline closing in the period, at historical conversion | + |
| Expansion | Whitespace under pursuit, at the team's expansion conversion | + |
| Churn and contraction | Dormant, renewal-risk and contraction lists, at their historical rates | − |
| Seasonality | The company's own seasonal index for the period against the window | ± |
| Known changes | Contracts won or lost, price changes, a customer's stated plan | ± |
Forecast = run rate + new business + expansion − churn ± seasonality ± known changes
Every line with evidence: a pipeline table, a whitespace table, a dormancy list, an index, a dated note.
Window: trailing three months. Period: next quarter.
| Line | Value | Evidence |
|---|---|---|
| Run rate | $3.4m | Trailing three months, annualised ÷ 4 |
| New business | +$0.5m | $1.9m weighted pipeline at 27% historical conversion |
| Expansion | +$0.2m | $0.9m whitespace under pursuit at 22% |
| Churn and contraction | −$0.3m | 14 accounts on the dormancy list at run rate; 3 renewals in notice |
| Seasonality | +$0.4m | Q4 index 1.12 against the window's 1.00 |
| Known changes | −$0.1m | Contract 2207 ending 30 Nov, dated |
| Forecast | $4.1m |
Four point one against a rep roll-up of four point six. The half million difference is nine deals the roll-up counts above their stage's conversion, and the bridge names them.
| Forecast | Run rate | Gap | Needs |
|---|---|---|---|
| $2.9m | $3.4m | −$0.5m | A churn or seasonality line worth half a million, with lists |
| $4.8m | $3.4m | +$1.4m | Pipeline and expansion lines worth $1.4m at historical rates |
Neither is wrong. Both are undefended without the lines.
Run rate presented as the forecast. Pipeline never asked about.
Forecast presented without run rate. No floor; no argument.
Lines without evidence. "Expansion, plus $200,000," and no whitespace table.
Seasonality omitted. The Q4 forecast looks like optimism when it is the index.
Mapped once, the ledger, the pipeline snapshots, the whitespace, the dormancy lists and the index produce run rate, the five lines and the forecast every period. Covirage builds this from the exports as they are. The forecast analysis solution describes the setup, and the run rate guide covers the floor itself.
Only in a business with no pipeline, no churn and no seasonality, which is none. In every other business it is the starting line, and a forecast presented with no bridge from it is a number with no argument.
That the company expects to lose revenue it currently has: churn, contraction, a seasonal trough, a contract ending. Each is a line with a list behind it. A forecast below run rate with no such line is either pessimism or a sandbag, and the bridge exposes both.
That new business or expansion is expected. The pipeline line should carry it at the team's historical conversion, and the expansion line at pursuit share of whitespace. A forecast forty percent above run rate with a pipeline line worth ten is thirty points of hope.