Revenue Calculator

What this revenue calculator does

Price times quantity. That is the whole calculation, and it is the first line of every income statement ever written.

Give this calculator a price and a number of units and it returns total revenue. Useful for a quick sales projection, for pricing a scenario, or for checking a figure somebody has quoted at you.

The arithmetic is trivial, so this page spends its time on the two things that are not. What a change in price actually does to your business compared with the same change in volume, which is where most pricing decisions go wrong. And the question of what counts as revenue in the first place, which turns out to have an entire accounting standard devoted to it.

Everything runs in your browser. Nothing typed here is stored or sent anywhere.

How to use it

1. Price. The selling price per unit, in whatever currency you work in. No currency is assumed.
2. Quantity. Units sold, or units you expect to sell, over whatever period you are thinking about.

Press Calculate. Press Reset to clear it.

The period is yours to decide and the tool has no view on it. Feed it a month's units and you get a month's revenue. Feed it a year's and you get a year's. Worth writing down which one you meant, because a projection built on a number nobody labelled is how forecasts drift.

For a product range with several prices, run each line separately and add the results. The calculator handles one price at a time.

The formula, and running it backwards

Total revenue = price × quantity

Two rearrangements are worth knowing, because in practice you often have the revenue and want one of the other two.

Quantity = revenue ÷ price

If you need 50,000 of revenue and you sell at 25 a unit, you need 2,000 units. That is the version worth doing before setting a sales target, because it converts a money goal into a thing people can actually count.

Price = revenue ÷ quantity

If you sold 2,000 units and booked 50,000, your average realised price was 25. Comparing that against your list price is a quick way to see how much discounting is actually happening, which is often more than anyone thinks.

This calculator goes forwards only. Both reverse cases are a single division and you can do them on a phone, but they are worth having in mind.

A worked example

You sell a product at 25 and expect to shift 2,000 units this month.

25 × 2,000 = 50,000 of revenue.

Now suppose you want 55,000 instead. There are two obvious routes:

Identical revenue either way. Most planning conversations stop there and treat the two as interchangeable.

They are not remotely interchangeable, and the difference is the most useful thing on this page.

Price or volume: the same revenue, very different profit

Revenue is the top line. Profit is what survives, and the two routes above treat cost completely differently.

When you raise the price, nothing about your costs changes. You make the same units, buy the same materials, pay the same wages. Every extra unit of price falls straight through to gross profit.

When you raise the volume, you have to make and buy more. The extra revenue arrives with extra cost attached, and only the margin on it is yours.

Say the product costs 15 to make, so the gross margin is 40 percent:

The price rise is worth two and a half times as much as the volume rise, on identical revenue.

And that understates it, because the volume route usually costs more than the table shows. Selling ten percent more units may mean more stock, more delivery, more customer service, more working capital tied up. The price route needs none of those.

This is why pricing gets the attention it does from anyone who has looked at the arithmetic. It is the only lever that improves the business without making it bigger. It is also the one with the obvious risk attached, which brings us to the next question.

How much volume you can afford to lose

The real objection to raising prices is that customers leave. Fair. So the useful number is how many of them can leave before you are worse off.

For a 10 percent price rise, holding gross profit level:

At a 40 percent margin you could lose a fifth of your customers on a 10 percent price rise and be exactly where you started, on less work and less capital.

Notice which way the table runs. Low margin businesses gain most from raising prices, because they have the least to lose per unit and the most room to shed volume. That is the opposite of the intuition most people have, which is that thin margins mean you cannot afford to move.

The same arithmetic in reverse is the one to be frightened of. Cutting prices 10 percent at a 40 percent margin requires a 33 percent increase in volume just to stand still. Discounting is a much more expensive habit than it looks, and it is usually adopted without anyone running that number.

None of this says raise your prices. It says know what the trade actually is before you decide, in either direction.

What counts as revenue, and when

Price times quantity gives you a figure. Whether that figure is your revenue for the period is a separate question, and one that has an international accounting standard behind it.

Both the international standard, IFRS 15, and its United States equivalent, ASC 606, were issued in May 2014 by the IASB and FASB working together, and both took effect for most companies from 2018. They replaced a patchwork of industry specific rules with one framework built on a single principle: revenue is recognised when control of the goods or services passes to the customer, in the amount you expect to be entitled to.

Both use the same five steps. Identify the contract. Identify the performance obligations in it. Determine the transaction price. Allocate that price across the obligations. Recognise revenue as each obligation is satisfied.

What that means in practice, for anyone whose business is not just handing over a box in exchange for money:

Revenue is not cash. You recognise it when you deliver, not when you get paid. Sell on sixty day terms and the revenue is this month's while the cash is next quarter's. This gap is why profitable companies run out of money.

Cash is not revenue either. Take a year's subscription up front and you have the cash, but you have not delivered eleven months of it. The rest sits as deferred revenue, a liability, and gets recognised month by month.

Expected returns come off the top. If a proportion of your sales will come back, revenue is recognised only on what you expect to keep.

Discounts and rebates reduce it. The transaction price is what you actually expect to be entitled to, not the list price you invoiced.

So the figure this calculator gives you is gross sales value. For a simple business selling for immediate payment, that is your revenue. For anything with contracts, subscriptions, staged delivery or returns, it is the starting point and the accounting is a further step.

Questions people ask

How do I calculate total revenue?

Multiply price per unit by units sold. 25 a unit across 2,000 units is 50,000.

How do I find the quantity I need to hit a revenue target?

Divide the target by the price. 50,000 at 25 a unit needs 2,000 units. This tool goes forwards only, so do that division yourself.

Is this gross or net revenue?

Gross, before returns, discounts and allowances. Net revenue is what remains after those, and it is the figure that appears at the top of a published income statement.

Should the price include sales tax or VAT?

No. Revenue is recorded net of sales tax, because that money is collected on behalf of the tax authority rather than earned. Our VAT calculator strips it out if your figures are tax inclusive.

Is it better to raise prices or sell more?

On the same revenue increase, price wins substantially, because it carries no extra cost. At a 40 percent margin a 10 percent price rise is worth two and a half times a 10 percent volume rise. See the section above.

I have several products at different prices. What do I do?

Run each one separately and add the results. The tool works with one price and one quantity at a time.

Does revenue mean profit?

No. Revenue is what came in before any cost. What matters is what is left afterwards, which is where return on sales picks up.

References

A note on sourcing. The revenue recognition principles described above come from IFRS 15 and its converged United States equivalent, ASC Topic 606, both issued in May 2014 following a joint project between the International Accounting Standards Board and the Financial Accounting Standards Board, and both effective for most reporting entities from 2018. They set out the five step model and the control based principle summarised here.

1. International Accounting Standards Board, IFRS 15, Revenue from Contracts with Customers. https://www.ifrs.org/issued-standards/list-of-standards/ifrs-15-revenue-from-contracts-with-customers/
2. International Accounting Standards Board, Revenue from Contracts with Customers, Project Summary. https://www.ifrs.org/projects/completed-projects/2015/revenue-from-contracts-with-customers/
3. Financial Accounting Standards Board, Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, Accounting Standards Update 2014-09.