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Revenue is the fuel that powers your company's success. Understanding your sales revenue goes beyond just knowing how much cash flows in; it's about understanding exactly what’s driving your growth and how to maintain a financially healthy business.

In this guide, we'll explain everything you need to know about annual business revenue, including how to calculate it, how to use it to generate financial reports, and considerations when applying for business credit cards.

What is annual business revenue?

Annual business revenue is the total income your business generated over 12 months or one fiscal year. Also known as gross sales or net sales, it's the raw sum of your company's sales of goods and service offerings. Think of it as the bottom line before factoring in expenses.

Annual business revenue is a key indicator of your company's financial health, reflecting its ability to generate cash and fuel its operations. Gaining insight into your business’s yearly sales revenue is essential for understanding its performance, growth, and financial standing.

TIP
Is annual business revenue the same as gross profit?
No, gross profit is the difference between your total revenue and the cost of goods sold (COGS). Revenue doesn't account for any costs or expenses associated with running the business.

How to find annual business revenue

Here’s how to find your company’s total revenue in four steps:

  1. Gather your financial statements: Start with your income statement and balance sheet. These documents contain vital information about revenue, expenses, and assets.
  2. Identify the relevant line items: Look for items like "gross sales," "net sales," and "total revenue" on your income statement.
  3. Consider the period: Determine whether you want to look for monthly, quarterly, or annual gross income. Make sure you're focusing on the correct timeframe.
  4. Account for adjustments: Certain transactions might require adjustments to accurately reflect your revenue. Consult with a financial expert or accountant if needed.

Gross vs. net annual revenue

Gross annual revenue is the total amount of money made from sales of products or services before deducting expenses. Net annual revenue is defined as your gross revenue minus returns and allowances.

Returns are the value of all returned or refunded goods and services, and allowances are the value of any sales or discounts offered on the goods or services.

Just knowing your gross revenue can be misleading. Net revenue paints a more realistic picture of your business's financial health and profitability than gross revenue.

How to calculate net annual revenue

To calculate net revenue for a given period, you can use this formula:

  • Net Revenue = Gross Revenue - Returns - Allowances

For example, let's say you’re a small business that sells handmade earrings. The earrings cost $50 a pair. You sold 12,000 pairs in total over the fiscal year, and customers returned 200 pairs. You sold 2,000 pairs during your annual 20% off sale, so customers saved $10 on each pair. 

You’d calculate your net annual revenue by subtracting the returns and allowances from your gross annual revenue:

  • Gross Annual Revenue = 12,000 x $50 = $600,000
  • Returns = 200 x $50 = $10,000
  • Allowances = 2,000 x $10 = $20,000
  • Net Annual Revenue = $600,000 - $10,000 - $20,000 = $570,000

If you have accurate income statements that show your total sales and your returns and allowances, it should be easy to calculate your company’s net revenue.

Annual recurring revenue

Annual recurring revenue (ARR) measures your business’s predictable, ongoing revenue from existing customer subscriptions. ARR provides invaluable insight into your business's stability and future growth potential. This metric is especially useful if your company offers subscription-based products or services.

You'd calculate your ARR by multiplying your monthly recurring revenue (MRR) by 12:

  • ARR = MRR x 12 Months

Let's say your business has a monthly recurring revenue of $1,000. Your base annual recurring revenue would be:

  • ARR = $1,000 x 12 = $12,000

You may need to do some more advanced calculations to account for additional monthly recurring revenue from subscription add-ons and upgrades and revenue lost due to subscription cancellations and downgrades.

Investors and creditors can gauge your business's ability to generate consistent income by focusing on ARR. As such, ARR is a crucial metric for attracting funding and securing credit.

Types of business revenue

Not all revenue streams are created equal. Knowing the types of revenue your business generates is important for maintaining accurate financial records and making strategic decisions.

Let's take a look at the two main types of revenue:

Operating revenue

Operating revenue refers to revenue generated through core business activities. For instance, a bakery's revenue would entail proceeds from selling cakes and pastries. Operating revenue is the lifeblood of your business, directly reflecting its performance and efficiency.

Non-operating revenue

Non-operating revenue is any income earned from activities outside of core business operations. For example, if the bakery rents its spare kitchen space to a catering company, the rental income would be considered non-operating revenue. While not directly tied to core activities, non-operating revenue can contribute positively to your bottom line.

Knowing the difference between these two types of revenue is vital for financial analysis and realizing the true drivers of your business's performance.

What is a good annual revenue for a business?

Now that you know how to calculate revenue—you may even have the figure right in front of you—you're probably wondering if it's good. Ultimately, it depends. Determining whether your annual revenue is within the right range for your business depends on a few factors.

The primary factors that determine good annual revenue include:

  • Business industry: Different industries have vastly different average revenue benchmarks. A tech startup might aim for high growth and rapid revenue increases, while a local coffee shop might be content with steady, moderate revenue.
  • Business stage: Early-stage businesses naturally have lower revenue than established companies. Regardless of the stage, a company should focus on maintaining consistent growth and exceeding internal milestones rather than basing comparisons on​ industry giants.
  • Business model: High-volume, low-margin businesses need significantly more revenue than niche, high-margin businesses to achieve profitability. A company must understand its cost structure and target margins to establish realistic revenue goals.

Here's a rough gauge of good annual revenue based on business size:

  • Small businesses (1–50 employees): $50,000–$5 million in annual revenue
  • Medium businesses (51–250 employees): $5 million–$50 million in annual revenue
  • Large businesses (251 or more employees): $50 million or more in annual revenue

It's important to point out that these are just broad indicators. Defining small, medium, and large businesses is often based on various factors, including industry, number of employees, and revenue. You’ll need to​ set attainable targets for growth based on your company’s circumstances.

How to report annual business revenue on a credit card application

Securing business credit can be crucial for your company's growth. When applying for a business credit card, your annual revenue can sometimes determine your eligibility and credit limit. 

Consider these factors when reporting your revenue on a business credit card application:

  • Report accurately: Provide the most accurate and up-to-date information about your annual revenue. Use your tax returns or audited financial statements for verification.​
  • Supporting documents: Gather tax returns, income statements, balance sheets, and bank statements to substantiate your reported revenue.
  • Other factors: Beyond revenue, credit card issuers evaluate factors such as business age, credit history, and debt-to-income ratio. Make sure your overall financial profile is strong.​​

Typically, credit card issuers and lenders ask for the last year's gross annual revenue, which is the amount before deducting taxes and expenses.

Tips for small businesses

As a newly established business, you may not have generated a year of revenue yet. In that case, it can be tricky to report your annual business revenue on a credit card application. Based on your credit issuer’s guidance, here are a couple of ways you can report annual revenue without a year of income:

  • Report $0: If you haven’t made any income yet, you may still be eligible for the credit card. Some providers don’t mind if you report $0 under annual revenue. Instead, they may ask for a report of your personal income.
  • Estimate revenue based on sales: Some credit card providers let you use revenue projections instead of actual revenue. You can calculate your projected annual revenue based on your business plans, past contracts, and expected sales. Just check that your provider allows revenue projections first. It also helps if you have documentation with your calculations.

Can you get a business credit card without any revenue?

You don’t need to be generating income to qualify for a business credit card. Credit card issuers usually consider your personal credit score and financial background for approval. So, you can still apply even if your business isn’t bringing in revenue. 

However, you may have to put up a personal guarantee, holding you personally liable if your business can’t pay off its credit card balance.

Some cards, like corporate cards, do come with revenue requirements. To qualify for them, you’ll have to wait until your business is more established. On the plus side, they usually don’t require credit checks or a personal guarantee.

Qualify for Ramp's corporate card based on revenue

Ramp is an all-in-one corporate card and expense management platform. To qualify, all you need is:

  • A registered LLC or corporation in the US
  • An Employer Identification Number (EIN)
  • $75,000 or more in a US business bank account—or, commerce businesses may be eligible for our sales-based underwriting
  • Personal contact details as the business owner

Our platform lets you manage all your expenses in one place, from paying bills to managing reimbursements. With automated receipt capture and expense reports, along with AI-powered spending insights, your business can save an average of 5% using Ramp.

Learn more about how Ramp can save your business time and money.

Try Ramp for free
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Finance Writer and Editor, Ramp
Ali Mercieca is a Finance Writer and Content Editor at Ramp. Prior to Ramp, she worked with Robinhood on the editorial strategy for their financial literacy articles and with Nearside, an online banking platform, overseeing their banking and finance blog. Ali holds a B.A. in Psychology and Philosophy from York University and can be found writing about editorial content strategy and SEO on her Substack.
Ramp is dedicated to helping businesses of all sizes make informed decisions. We adhere to strict editorial guidelines to ensure that our content meets and maintains our high standards.

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