Run-Rate EBITDA vs Historical EBITDA
Published February 2026
Historical EBITDA tells you what happened. Run-rate EBITDA tells you what's happening now. In a deal, the difference can be worth millions.
What Is Run-Rate EBITDA?
Run-rate EBITDA projects the company's current annualized earning power based on the most recent performance, adjusted for known changes. Unlike historical EBITDA (which looks backward at full fiscal years), run-rate EBITDA asks: "If the business continues at its current pace, what will it earn?"
It's calculated by taking a recent sub-period (typically trailing 3 or 6 months), annualizing it, and applying pro forma adjustments for changes that have already occurred or are certain to occur.
Run-Rate vs Historical EBITDA
| Dimension | Historical EBITDA | Run-Rate EBITDA |
|---|---|---|
| Time frame | Full fiscal year(s) | Annualized recent period |
| Basis | Actual results | Current trajectory + adjustments |
| Looks | Backward | Forward |
| Subjectivity | Lower (based on actuals) | Higher (requires assumptions) |
| Usefulness when... | Business is stable | Business is changing |
| Buyer preference | More conservative | Used when justified |
| Lender acceptance | Broadly accepted | Requires strong support |
When to Use Each
Historical: stable businesses
When revenue, margins, and expenses are consistent year-over-year, historical EBITDA is the most reliable indicator
Run-rate: growing businesses
When trailing 12-month EBITDA understates current performance due to recent growth
Run-rate: post-event changes
After a major contract win, price increase, cost reduction, or facility change that alters the earnings profile
Run-rate: mid-year transactions
When the deal closes mid-year and the most recent complete fiscal year is outdated
Both: comprehensive analysis
Best practice is to present both — historical for credibility, run-rate for current trajectory
How to Calculate Run-Rate EBITDA
Select the base period
Choose the most recent 3, 6, or 12 months that best represent current operations
Annualize
If using a sub-annual period, annualize: (Period EBITDA ÷ months) × 12
Adjust for seasonality
If the business is seasonal, ensure the annualization accounts for seasonal patterns
Apply pro forma adjustments
Add the full-year impact of changes that occurred during the period (see below)
Apply normalization adjustments
Standard QoE adjustments (owner comp, non-recurring items) applied to the run-rate figure
Document assumptions
Every run-rate assumption must be documented with supporting evidence
Common Run-Rate (Pro Forma) Adjustments
New contract annualization
$500K contract signed in month 9 → annualize to $500K full-year impact (net of COGS)
Price increase impact
10% price increase effective month 6 → project full-year impact on revenue and margin
Cost savings
Eliminated a $120K/year position in month 4 → add back the partial-year salary already recorded
Facility change
Moved to a new lease in month 7 → pro forma to full-year at new rate
Lost customer removal
Top customer churned in month 3 → remove their revenue from the run-rate (reduces EBITDA)
Red Flags in Run-Rate Analysis
Cherry-picked periods
Using the best 3 months instead of the most recent or most representative period
Unsupported 'pipeline' revenue
Including revenue from prospects that haven't signed contracts yet
Ignoring negative trends
Showing run-rate growth while recent months are actually declining
Double-counting
Applying both historical normalization and run-rate adjustments to the same item
No seasonality adjustment
Annualizing the best quarter without adjusting for the business's seasonal patterns