How to Calculate Total Revenue
How to Calculate Total Revenue
Total revenue can oftentimes be overlooked or miscalculated. Understanding your revenue, and more importantly, from which products/services did your revenue grow or change, can be one of the best exercises for you to complete. At its core, total revenue is the amount your business receives for the goods and services you sell in a specific time period.
If you don’t know your total revenue, it can be quite difficult to manage your product/service offerings, and quite difficult to plan for long-term success.
Total Revenue Formula and Example
Fortunately, the total revenue formal is fairly straightforward. Here it is:
Quantity Sold x Price = Total Revenue
Imagine you sell t-shirts and each one costs $75. If the number of units sold was 100 t-shirts per month, your total revenue for that month would be $7,500. (100 X $75 = $7,500).
You can use this same formula to figure out how many more t-shirts you’d need to sell to make the same amount of money before you offer a discount. The difference is that now, you’ll need to divide your previous total revenue figure by your discounted price.
If your discounted price is $70, then your calculation will be $7,500/$70. Your answer will be 107.14 t-shirts. This means, you’ll have to have at least 107 units sold of t-shirts to earn the same revenue you made before the discount.
The discount may make sense if you’re confident the discount will increase your sales proportionately more than you could have grown otherwise. Of course, you’ll also need to consider how much it costs to produce the t-shirts and the size of your audience.
Look at the Income Statement for the Total Revenue
The income statement, which is a history of how your business has performed over a certain time period will list your total revenue. You’ll find that the income statement is easy to read and understand, especially when you compare it to other financial statements. It will contain the following sections:
- Total Revenue: All the money you’re business earned during the period.
- Cost of Good Sold: How much it cost to produce what you sold during the period.
- Operating Expenses: How much you spent to run your business, including rent, payroll, marketing costs, etc.
Ready to Increase Your Revenue? Contact GrowthLab Today
At GrowthLab, we help small businesses like yours succeed. You can trust us to calculate your total revenue and make recommendations on how you can use it to increase your revenue and meet (or even exceed) your business goals.
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