How much money your business is making can sound like a simple determination, but there’s actually a variety of ways to quantify it. It may be called the bottom line, profit, income, performance, or a number of other terms. Even revenue is divided into total revenue, average revenue, or marginal revenue. The focus of this article will be understanding what total revenue means for your business and how it differs from other ways to determine your business’ financial success.
How much money your business is bringing in is the starting point for determining its success. Total revenue reveals how much money is generated before any expenses or deductions. So, this metric lets you know how much the business is making from selling its products or services. Understanding and tracking it is key for evaluating and growing your company.
Here's a great guide for calculating total revenue:
The formula to know your business’ revenue is to multiply the total amount of products or services sold by the price of those products or services. For more in-depth information on your revenue, you can also calculate your average revenue per user. You can use these formulas to create the full picture of your business’ income to improve revenue performance management.
The typical strategy to improve your business’ profit is to decrease expenses and increase revenue. Your expenses may be set or there could be a minimum amount they can reach, but revenue has limitless potential for growth. You can accomplish this by:
These are all great ways to boost total revenue. Raising your prices, using effective marketing strategies, and finding ways to incentivize customers will also make a positive impact.
If your company sells clothing, here’s an example of configuring your total revenue. Let’s say your business sells 10 dresses that each cost $50 and 15 skirts that each cost $20. To calculate the total revenue, you would multiply 10 by $50 and 15 by $20, then add both totals together. The total revenue would be $800.
Number of Products Sold x Price Per Product = Total Revenue
(10 x $50) + (15 x $20) = $800
If your company sells consulting services, use an hourly rate to calculate revenue. In the formula, think of each hours you worked as the number of "products" sold. If your rate is $50 per hour, and you work with one company for 10 hours and another for 15 hours, multiply your hourly rate by the number hours worked, then add the totals together. The total revenue would be $1250.
Number of Hours Worked x Price Per Hour = Total Revenue
(10 x $50) + (15 x $50) = $1250
Being fully informed about the financial status of your business helps you run it to the best standard possible. Understanding your revenue is important knowledge for judging your performance and growth. Continue to calculate and track it as you expand your business.