Knowing how to calculate sales revenue doesn’t require a degree or special software. You only need an understanding of a few business-related terms. Here are some of the most common ones you’ll need to understand:
Gross Profit
This refers to the total sales price you’ll receive after expenses are taken out. This includes any fees you will incur for having your services performed, as well as the cost of labor. It is the total profit you’ll earn from the sale.
Percentage of Sale
This represents the percentage of the total revenue you earn when you sell a product. This number is usually based on a percentage of what you sell, not a specific dollar amount. This percentage is also known as a gross profit percentage.
Net Revenue
This is the profit you’ll actually make from the sale minus all expenses. This figure includes all costs and fees related to the sale. These include things such as your overhead costs (the costs of running your business) and taxes (if applicable).
Average Cost of Sales
The average cost of the items you sell and the number of items you sell to make up the gross profit. This is the percentage of what you would actually make with each sale.
Cost of Goods Sold
This is the amount you will have to pay for the goods you sell. This includes the cost of materials, labor and other miscellaneous charges. If you sell many different types of items, your cost of goods sold will be a lot higher than the gross profit. If you buy the items in bulk, your cost of goods sold will be lower.
Cost of Sales
This is the amount of money you will lose if you don’t sell the item. when you have to return it because you don’t have the money for it. The more money you pay to get it back, the higher your cost of sales is. This includes inventory costs, fees for returning items, and the cost of shipping costs as well as taxes, handling costs and handling charges on returned goods.
Calculating Sales Revenue
A simple method of calculating sales revenue for products is:
Units Sold x Average Price = Sales Revenue
For service-based companies:
Customers x Average price of services = Sales Revenue
So, why go through all that terminology for a simple equation? Simple. So you can consider all the factors that make up your sales. You need to keep your sales and costs into consideration whilst creating a strategy. There could be a lot of money you’re not making, but until you work out what that may be you’ll be kept in the dark. So, ensure you’re brushing up on your terminology.
