Small Business Revenue | Definition, Formula, and How to Increase
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# The Basics of Small Business Revenue

Below you will learn what revenue is, why revenue is important, how to calculate it, and how to increase it.

## What is revenue?

Revenue is also called the top line because it is the first item listed on your small business income statement. You subtract business expenses from revenue to get your company’s bottom line.

You will determine your revenue differently depending on if you use accrual or cash accounting. In accrual accounting, you include sales made on credit as revenue, as long as you have given the goods or services to the customer. In the cash method of accounting, you only include sales as revenue if the customer has paid you.

### The two types of revenue

There are two types of revenue: operating and nonoperating revenue.

Operating revenue is revenue your company earns from its main business activities. For example, sales to customers are operating revenue.

Nonoperating revenue is revenue your company earns from activities that aren’t directly related to your business. For example, you might earn nonoperating revenue from investing or renting your building to another business.

## Why is revenue important?

If you want to increase your business profits, you need to increase your revenue. By keeping an eye on your revenue and focusing on increasing it, you can also increase your profits.

By tracking your revenue across consistent accounting periods, you can compare it over time. For example, you can compare your business revenue between years or quarters.

## Revenue formula

To calculate revenue, you need to know a few numbers.

First, calculate your operating revenue. Multiply the number of goods or services sold by the price you sold them for. For example, if you sell 300 pairs of shoes at \$80, your operating revenue would be \$24,000 (300 x \$80). Do this for all the products or services you sold. Add together all your operating revenue.

Total revenue = operating revenue + nonoperating revenue