Revenue Calculator

About the Revenue Calculator

Revenue is the money a business brings in from sales, before any costs are taken off. It is the top line of the income statement and the starting point for every forecast, budget and business plan. The basic sum is simple — price times the number of units sold — but forecasts usually need more: refunds, growth over time, and the difference between what has been earned and the pace the business is running at.

This revenue calculator covers all of that. From the price per unit and the units sold per month, it works out revenue net of returns, then projects it month by month with a monthly growth rate. It gives the total over the period, the first and final months, the annual run-rate, and the number of units sold.

How to Use the Revenue Calculator

Enter the price per unit: the average selling price, excluding sales tax.

Enter the units sold per month at the start.

Enter a monthly growth rate if you expect sales to grow. Use zero for flat sales, or a negative number for a decline.

Choose how many months to project, from 1 to 120.

Enter the returns and refunds rate, if any.

How Revenue Is Calculated

  first month     =  price × units × (1 − returns %)
  month n         =  first month × (1 + g)^(n − 1)
  total           =  first month × ((1 + g)^n − 1) ÷ g
  run-rate        =  final month × 12

With no growth, the total is simply the first month times the number of months.

Step-by-Step Example

A price of 25, 1,000 units in the first month, 5% monthly growth, 12 months and 2% returns.

  First month:  25 × 1,000 × 0.98               =  24,500.00
  Month 12:     24,500 × 1.05^11                =  41,903.31
  Total:        24,500 × (1.05^12 − 1) ÷ 0.05   =  389,969.60
  Run-rate:     41,903.31 × 12                  =  502,839.77
  Units sold:   1,000 × 15.917                  =  15,917

Revenue, Run-Rate and Profit

Revenue is what was actually earned over the period: 389,969.60 in the example.

Run-rate is the latest month multiplied by twelve: 502,839.77. It describes how fast the business is selling now, not what it has earned. For a growing business it is always higher than the year's actual revenue, which is why it is popular in pitches and worth treating with care.

Profit is what is left after costs. High revenue with thin margins can still mean a loss; use the gross profit and net profit calculators to follow revenue down to the bottom line.

How Growth Compounds

Monthly growth adds up faster than it looks, because each month builds on the last:

A young business can grow 5% or 10% a month for a while, but few sustain it for years. When projecting further ahead, it is sensible to use lower rates, or to run several scenarios — cautious, expected and optimistic — and plan around the cautious one.

Building a Revenue Forecast

Start from real data. Use recent months of actual sales for the price and starting volume.

Separate products or channels if they grow at different rates, and add the results.

Allow for seasonality. Many businesses sell far more in some months than others; a steady growth rate smooths that out.

Include returns and refunds, which reduce revenue as surely as lost sales.

Review it monthly against what actually happens, and adjust.

Revenue Recognition in Brief

Accounting rules decide when revenue counts, and it is not always when the money arrives. Under accrual accounting, revenue is recorded when the goods are delivered or the service is performed, even if the customer pays later. A subscription paid a year in advance is recognised month by month as the service is provided, not all at once when the payment arrives.

For simple forecasts, units sold times price is usually close enough. For subscriptions, long projects and deposits, the timing of revenue can differ a lot from the timing of cash, and a business can report strong revenue while its bank balance falls.

Price or Volume?

Revenue can grow in two ways: selling more units or charging more for each one. The calculator lets you test both. Raising the price by 10% with the same volume raises revenue by 10%, and usually profit by much more, because the costs of making each unit do not change. Growing volume by 10% also raises revenue by 10%, but brings extra costs for every additional unit.

The best forecasts consider both levers, and what customers are likely to do in response. A price rise that loses a few customers can still increase revenue and profit. Run the numbers for each option before deciding.

Revenue Per Customer

Another useful way to look at revenue is per customer. Dividing revenue by the number of customers shows how much the average customer spends, and it points to a third lever beyond price and volume: selling more to each existing customer through repeat orders, add-ons and upgrades.

Understanding Your Result

Total revenue is the net revenue over all the months projected.

First month and final month show where the projection starts and ends.

Annual run-rate is the final month's revenue times twelve.

Units sold is the total number of units over the period.

Worth knowing explains the difference between run-rate and revenue earned.

When Should You Use This Calculator?

Writing a business plan or pitch.

Setting sales targets for a team or a year.

Testing pricing changes against volume.

Estimating the effect of refunds on income.

Checking a run-rate figure someone has quoted.

Common Mistakes

Including sales tax in the price.

Confusing run-rate with annual revenue.

Assuming high growth continues indefinitely.

Ignoring returns and refunds.

Treating revenue as profit.