How is total revenue calculated?

You multiply the selling price per unit by the number of units sold. If you sell 800 items for fifteen dollars each, your revenue is $12,000. Because it's a multiplication problem, you can also work backwards: if you divide revenue by quantity, you get the price, and if you divide revenue by price, you get quantity.

What is the difference between revenue and profit?

The turnover is the amount made from sales before costs are deducted. The profit is the amount left over after all of the costs for producing and selling a product have been subtracted. If there is high turnover with low profits this usually means that the sales are not bad but the costs are high. If the turnover is $120,000 and the costs are $96,000 then the profit would be $24,000.

When should you distinguish between gross sales and net sales?

If the impact of returns, discounts and refunds on your numbers is not negligible, then you should separate them. For digital products with a low return rate, total sales are usually sufficient. For clothing items with a high return rate, total sales can overstate the size of your business, so it makes sense to use net sales and enter your return and discount rates.

What does one learn through the total sales test?

One can determine whether revenue increases or decreases when price changes. If a price increase results in higher total revenue, demand is inelastic at that range. If a price increase results in lower revenue, demand is elastic. The point where demand has unit elasticity represents the maximum of total revenue, where the increase in price and decrease in quantity sold exactly offset each other.

Can it be used to calculate subscription revenue?

Yes. Enter the number of subscribers as quantity and plan price as unit price. Make sure that the period matches. Multiplying monthly subscriber count by monthly price will give you monthly recurring sales volume, which can then be converted to annual recurring sales using "annual" option.

Revenue Calculator

Price and quantity

Price per unit

Quantity sold

Total revenue

Take out returns and discounts

Turn gross revenue into net revenue after refunds, returns, and discounts.

Test a different price

Enter a new price and the quantity you would sell at it to run the total revenue test.

Annualize a per-period figure

Scale a weekly, monthly, or quarterly revenue figure up to a yearly run-rate (MRR to ARR).

Enter any two of price, quantity, and total revenue. The calculator solves for the third.

Please input values into the fields

Revenue is the product of price and quantity, but there are three questions worth considering behind this simple multiplication. If you sell 500 items at $20 each, what's your revenue? What price do you need to charge to hit a revenue target of $50,000? If you want to make $12,000 in revenue and the price per item is $15, how many items do you need to sell? This calculator will find the missing value when given two out of three values: price, quantity or total revenue.

In addition to this, you can calculate net sales by deducting returns and discounts, analyze the impact of price changes on overall sales or convert monthly data into an annual rate.

What is total revenue?

Total revenue is the total amount of money a company makes from selling goods or services over a certain period of time before any costs are subtracted. It's listed at the top of an income statement and is therefore also referred to as "the top line". Profit, on the other hand, is what remains after all expenses have been deducted, so there can be significant differences between revenue and profit. For example, a company might generate $1 million in revenue but only make $100,000 left over after paying for materials, salaries, and rent.

\text{Total Revenue} = \text{Price} \times \text{Quantity Sold}

Since this relationship is a simple multiplication, it can be reversed in two ways. If you divide the revenue by the quantity, you get the price per item. If you divide the revenue by the price, you get the number of items sold.

\text{Price} = \frac{\text{Total Revenue}}{\text{Quantity}} \qquad \text{Quantity} = \frac{\text{Total Revenue}}{\text{Price}}

Here's how to use this calculator.

If you enter in the price and sales volume for each individual product, then you can determine total revenue.
You can also just enter sales or either price or quantity, and the missing information will be automatically filled in for you.
The 'show net revenue' option allows you to account for returns and discounts, the 'test price change' lets you run a sales test, and the 'annualize' will extrapolate data from one period into a full year.

This applies to any model where revenue is the product of sales price and quantity sold. For service companies, multiply the number of customers by the average price per customer. For subscription models, multiply the number of subscribers by the monthly price. In retail, calculate separately for each product line then add up the results. With mixed data, it's not possible to see which products actually contribute most to overall revenue.

Total sales and net proceeds

Total sales is the amount calculated from all selling prices and is usually the most prominent number on a report. Net revenue is the actual amount remaining after subtracting returns, credits, and discounts. The difference between these two values is important if those deductions have a significant impact on the numbers.

For digital products with a low return rate you can use the total sales without much distortion. However this is not true for clothing items where say 25% of orders are returned. The total sales will always overestimate your business size in this case. If you enable "show net revenue" and enter the returns and discount rates then the calculator shows the billed amounts, the total net revenue and the actual proportion of the total sales that remain.

Sales test

Price and quantity are inversely related. When the price is increased, although the sales price per unit will go up, but generally speaking, the number of units sold goes down. Whether revenue increases or decreases depends on which effect dominates, and this can be tested with a revenue test.

This test is based on the price elasticity of demand. This is the ratio of the percentage change in quantity to the percentage change in price. If demand is inelastic, a price increase leads to higher revenue. If demand is elastic, a price increase leads to lower revenue. Revenue is maximized when demand has unitary elasticity, i.e. the two effects cancel each other out.

A typical example calculates the sales of a software product sequentially using a demand table. Each row contains the price, expected quantity at that price and resulting revenue.

Price	Quantity	Total revenue	Elasticity
$20	30	$600	-0.33 (inelastic)
$30	25	$750	-0.60 (inelastic)
$40	20	$800	-1.00 (unit elastic)
$50	15	$750	-1.67 (elastic)
$60	10	$600	-3.00 (elastic)

Revenue is maximized at $800 when the price is 40 with elasticity of -1. Revenue falls both above and below this price. Below this price demand is inelastic, so increasing price will be beneficial. Above this price demand is elastic, so increasing price will result in a loss. A calculator can take current price and quantity as well as a test price and the expected quantity at that price to give new revenue, change, and whether demand appears to be elastic or inelastic over that range.

Recurring revenue and annual sales

In the subscription business it is common to talk about monthly recurring revenue (MRR) and annual recurring revenue (ARR). Both are simply a result of plugging in the number of subscribers and plan price as unit cost into a formula. Multiplying the number of subscribers by the monthly price gives you MRR, while multiplying both sides of the equation by a factor of one year gives you ARR.

Please make sure that the time periods match. Multiplying monthly price by annual quantity will give you a meaningless number. The "Annualize" option allows for comparison on an equal basis by converting weekly, monthly and quarterly data to annual.

Examples of applications for sales data:

The sales team can use the current close rate and average deal size to determine how many sales are needed to meet goals and run stress tests.
The marketing team can then calculate campaign revenue backwards, starting with the conversion rate and average order value.
Entrepreneurs can use this formula repeatedly with different prices and sales figures to make predictions.
This is where you can make price decisions, a five dollar increase in the price will either decrease sales by ten percent or thirty percent - that makes a big difference.

Tips for accurate sales data:

Make sure that the time periods match up. Multiplying a monthly price by an annual quantity will give you numbers that don't make sense.
Please use actual net price that customers actually pay rather than advertised listed price.
In a subscription model you need to decide up front whether you are going to model gross operating income or an operating income that is adjusted for churn rate. The two aren't the same thing.
Please separate product lines before you summarize them. Mixed data makes it impossible to see what products are actually contributing.

This calculator is for general planning and educational purposes only and does not constitute accounting or financial advice. The definition of revenue can vary depending on the reporting entity. So you should check how returns, discounts and realized sales are treated in your books before using certain data.

Frequently asked questions

How is total revenue calculated?: You multiply the selling price per unit by the number of units sold. If you sell 800 items for fifteen dollars each, your revenue is $12,000. Because it's a multiplication problem, you can also work backwards: if you divide revenue by quantity, you get the price, and if you divide revenue by price, you get quantity.
What is the difference between revenue and profit?: The turnover is the amount made from sales before costs are deducted. The profit is the amount left over after all of the costs for producing and selling a product have been subtracted. If there is high turnover with low profits this usually means that the sales are not bad but the costs are high. If the turnover is $120,000 and the costs are $96,000 then the profit would be $24,000.
When should you distinguish between gross sales and net sales?: If the impact of returns, discounts and refunds on your numbers is not negligible, then you should separate them. For digital products with a low return rate, total sales are usually sufficient. For clothing items with a high return rate, total sales can overstate the size of your business, so it makes sense to use net sales and enter your return and discount rates.
What does one learn through the total sales test?: One can determine whether revenue increases or decreases when price changes. If a price increase results in higher total revenue, demand is inelastic at that range. If a price increase results in lower revenue, demand is elastic. The point where demand has unit elasticity represents the maximum of total revenue, where the increase in price and decrease in quantity sold exactly offset each other.
Can it be used to calculate subscription revenue?: Yes. Enter the number of subscribers as quantity and plan price as unit price. Make sure that the period matches. Multiplying monthly subscriber count by monthly price will give you monthly recurring sales volume, which can then be converted to annual recurring sales using "annual" option.

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Disclaimer: This calculator is provided for general informational and educational purposes only. Our calculators are under active development, and results may be inaccurate, incomplete, or unsuitable for your situation. Always verify the figures independently and seek advice from a qualified professional before relying on them. We make no warranties and accept no liability for any loss or decision arising from use of this tool.

References

Investopedia: Revenue
Definition of revenue, gross versus net, and where it sits on the income statement.