What does a run rate valuation primarily help to determine?

A run rate valuation is primarily used to assess a company's future financial performance by projecting its current revenue over a year, based on its present performance metrics. This approach is particularly useful for startups and growing companies that may have seasonal or fluctuating sales.

By extrapolating the current revenue to a full year, stakeholders can gauge the annual revenue potential of the business, factoring in how much it could earn if current trends continue. This form of valuation gives investors a clearer picture of what they might expect in terms of income, ultimately aiding in making informed decisions regarding investments and company growth strategies.

In contrast, while other aspects such as market share, employee salaries, and investment risks are important for a holistic view of business operations and strategic planning, they are not the primary focus of run rate valuation. The primary focus is on revenue potential, which directly impacts the viability and scalability of a business.