Profit & margins
Total revenue formula
The total revenue formula multiplies the price of each product by the quantity sold, then adds the results across every product: total revenue = Σ (price × quantity sold). For an online store you'll usually also want net revenue, which takes off discounts, returns and refunds.
The total revenue formula
Total revenue = Σ (Price × Quantity sold)
- Price
- the price each unit actually sold for
- Quantity sold
- units sold at that price in the period
- Σ
- add the results for every product
For a single product, it's simply price × quantity.
Worked example
Worked example: four products in one monthExample numbers
| Product | Price | Units sold | Revenue |
|---|---|---|---|
| Organic tee | $30 | 600 | $18,000 |
| Fleece hoodie | $60 | 250 | $15,000 |
| Ceramic mug | $18 | 400 | $7,200 |
| Canvas cap | $25 | 472 | $11,800 |
| Total | $52,000 |
Gross vs net revenue
The $52,000 above is gross sales: the value of orders before anything comes off. What you actually earn is net revenue:
Net revenue = Gross sales − Discounts − Returns and refunds
Continuing the example, with $3,000 of discounts and $2,000 of returns and refunds:
Net revenue = $52,000 − $3,000 − $2,000 = $47,000
Use net revenue for margins, ROAS and any profit calculation. Gross sales overstate how much money the store really brought in, especially in months with heavy promotions.
The AOV shortcut
For a whole store, it's usually quicker to work from orders than products:
Revenue = Number of orders × Average order value (AOV)
625 orders at an AOV of $75.20 gives 625 × $75.20 = $47,000, the same net revenue.
This version shows the two levers for growing revenue: more orders, or bigger orders. The AOV uplift calculator shows what raising AOV is worth.
AOV Uplift CalculatorThe extra monthly revenue and profit from raising your average order value.What to leave out of revenue
- Sales tax collected from customers. It belongs to the tax authority.
- Gift card sales, until the gift card is redeemed. Until then it's money you owe in goods.
- Refunded orders. Take them off as returns and refunds.
- Shipping charges, if you report shipping as a separate line. Be consistent.
From revenue to profit
Revenue is the top line; profit is what's left after costs. A store can grow revenue while profit falls, for example by buying sales with heavy ad spend or discounts. The guide to revenue vs profit shows how, and the net profit formula walks from revenue down to the bottom line.
FAQ
How is total revenue calculated?
Multiply each product's price by the quantity sold, then add the results together. For a store selling one product at $30, 600 units sold is $18,000 of total revenue.
What's the difference between revenue and sales?
They're usually used interchangeably. Be clear about gross vs net: gross sales are before discounts and returns, net revenue is after.
Does total revenue include shipping and tax?
Sales tax collected from customers isn't your revenue; you pass it on to the tax authority. Shipping charged to customers is often reported as a separate revenue line. Exclude tax, and decide whether to include shipping, then do it consistently.
Is total revenue the same as profit?
No. Revenue is what customers pay; profit is what's left after costs. See the guide to revenue vs profit.