The basic formula for calculating sales revenue

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A young man using a calculator
For most businesses, the revenue formula is pretty straightforward:

Sales revenue = Units Sold × Average Selling Price (ASP)
Let’s break that down:

Units sold: How many products or services the business sold during a period.
Average Selling Price (ASP): The average price businesses sell each unit after discounts and promotions.
For example, if a fashion store sells 500 T-shirts at an average price of US$ 20 each, their revenue would be:

500 × 20 = US$ 10,000
It sounds easy, right? It can become a little more complex veterinary email list depending on the business model. Here’s a look at how this works for different types of businesses.

Total revenue formula
Total revenue helps businesses see how pricing affects product demand. It’s the best way to see the overall relationship between price and sales at any given time. Here’s its simple formula:

Total Revenue = Price x Quantity Sold
Revenue calculation for different business models
Person working on a financial report
Every business is unique, and the way they calculate revenue can vary. Here’s how it works for some common models:

1. Product-based businesses
If the business sells physical products, its revenue comes from the number of units sold multiplied by the price per unit. This sounds simple, but remember to account for returns, refunds, and discounts.

Example:
Let’s say a phone store sells 1,200 gadgets at US$ 50 each. However, consumers returned 100 gadgets. Here’s what its revenue will look like:

Revenue = (1,200−100) × 50 = 1,100 × 50 = US$ 55,000
Note: Remember, gross revenue is the total before accounting for returns. Net revenue is what’s left after those adjustments.

2. Service-based businesses
Revenue for service businesses depends on the number of clients served or hours worked multiplied by the rate charged. The formula changes slightly here:

Revenue = Number of customers (or hours) x average price of services
Example:
A freelance designer charges US$ 100 per hour and works 150 billable hours monthly.

Revenue = 150×100 = US$ 15,000
This model can also include project-based fees, which may vary monthly.

3. E-commerce businesses
E-commerce platforms often involve discounts, returns, and promotions, which can complicate calculations. Be sure to account for these adjustments.

Example:
An online store sells 600 items at US$ 25 each, but consumers return 10%.

Revenue = 600 × 25 × (1 − 0.10) = 600 × 25 × 0.90 = US$ 13,500
4. Subscription-based businesses
Companies using subscription models can calculate their revenue based on their subscribers and the price of the fee. Here’s a good example: let’s say a streaming service averages 5,000 subscribers that pay US$ 30 monthly. The company’s monthly revenue will look like this:

Revenue = 5,000 × 30 = US$ 150,000
Another thing that makes this model special is its recurring nature. For this reason, businesses can even predict their income.

4 common adjustments to revenue calculations
People discussing the business’s revenue
Revenue rarely comes in clean and simple. Here are some common adjustments businesses often make:

Returns and refunds: Subtract the value of any returned or refunded items to get your net revenue.
Deferred revenue: If clients pay in advance for a service (like a yearly subscription), only count the portion corresponding to services already delivered.
Discounts and promotions: Adjust the ASP to reflect any sales or promotions the business ran during the period.
Currency conversion: For international sales, convert foreign revenue into the base currency using current exchange rates.