A lot goes into determining your company's financial health. Still, knowing your total revenue—how much money you make from selling your products and services—is an excellent starting point.
So, why is total revenue important to your business and how do you calculate it? We’ll cover all that and more, so let’s dive in!
What Is Total Revenue?
Total revenue—also called gross revenue, total sales, or sales revenue—is the amount of money your business generates from selling its services or products during an accounting period.
For example, if you own a restaurant, your revenue will come from selling food, drinks, and merchandise.
The total revenue is the first section you'll see on your income statement. It shows all the cash your business brought in during an accounting period.
When calculating the total revenue, it’s important to note that your business can generate income from two major sources: operating activities and non-operating activities.
Operating revenue is the revenue you make from selling your products and services (the main line of your business). For example, if you’re a restaurant business owner, the food and drinks you sell make up your operating revenue since they’re your primary income sources.
Non-operating revenue is the revenue you generate from activities not related to your core business operations. For instance, the cash you generate from selling some of your restaurant’s kitchen equipment would be non-operating revenue since it’s a one-off sale and inconsistent.
Other non-operating revenue sources may include lawsuit proceeds, dividends from investments, or donations.
Which One Do You Use for Total Revenue?
You only use operating revenue when calculating total revenue since non-operating revenue is irregular.
Now that we’ve answered this burning question, let’s take a closer look at why total revenue is important.
Total Revenue Calculator
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Why Is Total Revenue Important for Your Business?
Total revenue is crucial since it shows how in-demand your product is. If you have high revenues, that means customers want to buy your product and, chances are, you have a strong share of the market.
That’s a great place to be in if you’re thinking about growing your business. You may be able to take some risks—and re-invest some of that hard-earned money into new equipment, employees or other critical functions—all the while knowing you have revenue coming in.
If your revenue isn’t where you want it to be—then it’s a clear metric to set a goal for.
“Total revenue is hugely important as it is the simplest way to measure your progress towards the goals you've set.”
—Ryan Turner, Klaviyo Expert & E-commerce Agency Owner.
You can also use your sales revenue to make pricing decisions. If your business costs are higher than your sales revenue—you definitely will be losing money. So, you can either increase prices or reduce expenses to make more money.
Also, if you want to sell your business, total revenue could play a massive role in the sale price, depending on the potential buyer.
While profits have the most significant influence on how much you could sell it for, your revenues may be of more interest than profits to potential buyers if they’re focused on increasing market share over everything else.
How Do You Calculate Total Revenue?
Calculating the total revenue of your business is pretty straightforward. You just multiply the total amount of units sold by the price of those items.
Here’s the total revenue formula:
Total Revenue = Quantity Sold x Price Per Unit
For example, let’s say your restaurant’s total sales for the week comes from selling the following: