What Is Revenue?

What revenue means

Revenue — sometimes called sales or turnover — is the top line of your income statement. It is the money customers pay you for what you sell, before you pay for anything yourself.

If you run a coffee shop and sell 1,000 coffees in a month at $4 each, your revenue for that month is $4,000. Revenue does not yet consider beans, milk, rent, or wages.

Why it matters for small business

Revenue is the size of your business in terms of activity. It shows how much you sold, but on its own it does not tell you whether you made any money. Two businesses can have the same revenue and very different profits.

Simple formula

For a service business, it's the number of hours, projects, or subscriptions sold multiplied by their price.

Practical example

A freelance designer charges $80 per hour and bills 60 hours in a month.

That $4,800 is revenue. It is not the freelancer's profit — software, taxes, and unpaid hours still need to be considered.

Common mistakes

• Confusing revenue with profit. Revenue is money in; profit is what's left after costs.
• Counting deposits as full revenue too early. A 50% deposit for work you haven't done yet isn't fully earned revenue under most accounting rules.
• Forgetting refunds and discounts. "Net revenue" subtracts returns, refunds, and discounts from gross sales.

Next steps

Once you understand revenue, the next question is: how much does it cost you to make those sales? That leads to Cost of Goods Sold and then Gross Profit.