Definition
Revenue is the total amount of income a business generates from its normal business operations, typically from the sale of goods and services, before any costs or expenses are deducted. It is often referred to as the « top line » on an income statement because it is the first number listed. Revenue is the primary driver of a company’s profitability and growth.
Examples
- SaaS Company: A company with 1,000 customers paying a $50/month subscription has a Monthly Recurring Revenue (MRR) of $50,000.
- Consulting Firm: A firm bills a client $20,000 for a completed project. That $20,000 is recognized as revenue.
- E-commerce: An online store sells 100 shirts at $25 each. The total revenue for the day from those sales is $2,500.
- Go-To-Market Team as a Service: The revenue generated specifically from the new market an outsourced GTM team has penetrated.
Advantages/Benefits of Tracking It
- Core Health Metric: It’s the most fundamental measure of a company’s ability to generate sales and attract customers.
- Basis for Financial Analysis: All profitability metrics (like net income or profit margin) are calculated by subtracting costs from revenue.
- Performance Measurement: Revenue targets and revenue growth are key KPIs used to measure the performance of the entire company, as well as sales and marketing teams.
- Strategic Planning: All business decisions, from budgeting to hiring and R&D, are based on current revenue and future revenue projections.
Related terms
- Profit
- Revenue Target
- ARR (Annual Recurring Revenue)
- MRR (Monthly Recurring Revenue)
- Income Statement
- Sales Forecasting
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