At a Glance
Revenue, more commonly known as sales, is a business income generated from normal trading activities. Normal trading activities here include things like the selling of goods and services.
Revenue is the main income from which the cost of goods and services, as well as other business expenses, are deducted in order to arrive at a profit.
A Simple Example
Number of Units Sold x Sale Price = Revenue
If a business sold 100 units of a item for $50, the revenue would be:
100 x $50 = $500
What Revenue means for your business
Revenue is your top-line income that ultimately leads to your profits. It is what keeps your business alive. Apart from being a lifeline, your business revenue can give you useful insights for decision making. For example, to increase your profit, you need to increase your revenue while keeping costs low.
Apart from determining profitability, outside investors and lenders tend to focus on revenue numbers to analyze a company's investment viability. So if, like most entrepreneurs, financing and profitability are important to you, you might want to keep a close eye on your revenue numbers at all times.