Total Revenue and Revenue Streams
- So now that you're selling dozens of pastries, cakes, and loaves of bread everyday,
- At the end of the week, you want to know how much money your business earned.
- This is where total revenue and revenue streams come into play.
Definition
Revenue
The total income generated by a business from its sales of goods or services before any costs are deducted. It is calculated as:
$$\text{Total Revenue} = \text{Price per Unit} \times \text{Quantity Sold}$$
Total Revenue: The Foundation of Business Income
- The total income a business earns from selling its goods or services over a specific period.
- Calculating it is also straightforward:
$$\text{Total Revenue} = \text{Price per Unit} \times \text{Quantity Sold}$$
Note- Total revenue is a gross figure, meaning it doesn't account for any costs or expenses.
- It simply reflects the income generated from sales.
Why Total Revenue Matters
- Performance Measurement: It helps assess how well a business is doing in terms of sales.
- Pricing Decisions: Understanding how changes in price affect revenue can guide pricing strategies.
- Profitability Analysis: Total revenue is a key component in calculating profit or loss.
Revenue Formulae
$$\text{Total Revenue (TR)} = \mathrm{P} \times \mathrm{Q}$$
$$\text{Average Revenue (AR)} = \frac{\mathrm{TR}}{\mathrm{Q}}$$
$$\mathrm{P=\frac{TR}{Q}} \qquad \mathrm{AR = P}$$
TipAlways track total revenue alongside costs to get a complete picture of your business's financial health.
Revenue Streams: Diversifying Income Sources
- While total revenue focuses on income from sales, revenue streams encompass all the different ways a business earns money.
- Diversifying revenue streams can make a business more resilient and less dependent on a single source of income.
- The various sources of income a business earns from its operations.
