Revenue
Last updated: May 15, 2025
What is Revenue?
Revenue is defined as the income generated through a business’ primary operations. It is often referred to as “top line” and is shown at the top of an income statement.
Revenue Formula
How to calculate Revenue
If a customer signs an annual contract for $12,000 consisting of monthly payments, then the revenue for each month of that year is $1,000, and the revenue for that year is $12,000.
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Revenue benchmarks
Annual Revenue Growth Rate by ARR
Annual Revenue Growth Rate by Target Customer
How to visualize Revenue?
To visualize your Revenue, you can use a summary chart to display the value and optionally compare it to a previous time period.
Revenue visualization example
Summary Chart
Revenue
Chart
Measuring RevenueMore about Revenue
Revenue is the income generated from primary business operations and activities such as product sales, rent, interest, or other income. Costs such as COGS and other expenses are not deducted from revenue. Revenue is referred to as a “top line” figure and is shown at the top of the income statement. Costs and expenses are deducted from revenue to obtain net income.
Tracking revenue can give businesses an idea of the amount of money being generated across different revenue streams, which can help growth by highlighting the best and worst performing parts of the business.
There are multiple ways of recognizing revenue, based on the accounting method used by the business. A business can either recognize revenue when payment is received, or when the business has received sales on credit. It is important to note that while all sales can be considered revenue, revenue can consist of income sources other than sales, such as non-operating revenue.
Revenue Frequently Asked Questions
What's the difference between bookings, revenue, and cash, and why don't they match up on our reports?
These three metrics represent different stages of the customer value lifecycle. Bookings capture the total contract value when a deal is signed, representing a future commitment. Revenue is recognized when you've delivered the product or service, following accounting principles (ASC 606 or IFRS 15) that may spread recognition over time. Cash is collected when the customer actually pays, which might be upfront, in installments, or after delivery. The gaps between these metrics reveal important business dynamics: a growing gap between bookings and revenue suggests accelerating growth, while a widening gap between revenue and cash could indicate collection challenges or changing payment terms. Monitoring all three metrics provides a more complete picture of business momentum than any single number.
Should we focus more on total revenue or recurring revenue?
While total revenue drives immediate financial performance, recurring revenue (subscription, maintenance, etc.) usually creates significantly more long-term value, especially for growing companies. Recurring revenue provides predictability, reduces acquisition costs through retention, and typically commands higher valuation multiples (often 5-10x higher than one-time revenue). The ideal approach is tracking both, but emphasizing recurring revenue growth and retention metrics in strategic planning. A useful analysis is calculating your "recurring revenue base" at the start of each period—this represents revenue you'll generate without additional sales effort if retention remains stable, essentially your "guaranteed" baseline before new business.
How can we identify the most promising revenue growth opportunities in our data?
The most valuable insights typically come from segmentation analysis across multiple dimensions. Break down revenue by customer segment, product line, geography, acquisition channel, and customer tenure to identify pockets of outperformance. Look for segments with both strong growth rates and expanding gross margins, as these represent your most profitable growth vectors. Cohort analysis is particularly revealing—tracking how revenue from customers acquired in the same period evolves over time can uncover whether your customer success and expansion strategies are improving. Finally, examine revenue concentration: segments contributing more than 20% of revenue deserve deeper analysis for both growth opportunities and concentration risks.