How to Calculate Anticipated Total Revenue
Original post by Steve Brachmann of Demand Media
The total revenue of a business is simply the cost per unit of each good or service sold multiplied by the number of sales experienced for each individual good or service. (See References 4, definition titled "Total Revenue") An accurate forecast for a business's anticipated total revenue for an upcoming fiscal year is crucial when trying to determine whether the business can operate at a profit. Maintain accurate business records to ensure proper revenue forecasting for upcoming fiscal years.
Create a revenue spreadsheet that lists individually each product or service sold by your business. In the first column of the spreadsheet, identify each individual product or service. In the second column, list the planned unit price charged to a customer for each product or service.
Forecast the customer demand for your products and services over the following fiscal year. Research business records and invoices for the previous few years to determine customer trends and estimate the level of sales your business will probably experience. Demand forecasting is simpler for smaller businesses that cater to a few hundred customers. If your business is a new start-up, talk with other owners of related businesses in your area to determine the level of sales your business can expect. Include the number of predicted sales for each good or service sold by your business in the third column of your revenue spreadsheet.
Multiply the price of each good or service by the number of predicted sales for that product during the upcoming year. This will give you the amount of anticipated revenue earned by each product or service for the upcoming year. Include these totals for each individual product in the fourth column of your spreadsheet.
Add all revenue figures in the fourth spreadsheet column together to determine the anticipated total revenue for your business over the upcoming year.
Tips & Warnings
- Use your anticipated total revenue forecast to complete other financial calculations which can forecast the profitability of your business. These include break-even analyses and cash flow statements. Total revenue forecasts are also important when determining the fiscal year budget for your business.
- Spreadsheet software
- Business records and invoices
- MissouriBusiness.net: Start-Up and Annual Expense Worksheets
- The Decision Makers' Direct: Revenue Management
- Reference for Business: Break-Even Point
- CalculatorWeb: Profit Calculator
About the Author
Steve Brachmann has been working professionally as a freelance writer since 2007. Hailing from Angola, N.Y., his work has been published in "The Buffalo News," SUNY-Fredonia's "The Leader" and on various websites. He is currently attending the State University of New York-Fredonia to earn a Bachelor of Fine Arts degree in acting with a communication minor.