Much goes into ascertaining a business’s financial health. This means, without knowing your annual revenue, you won’t be able to know if your business is growing, or stagnant or even calculate whether it has healthy profit margins. Thus, business annual revenue is a crucial benchmark that companies use to track the cost of inventory sold or business expenses. To provide them with valuable business insights for effective budgeting and financial forecasts. Before we go further, we will first explain what annual revenue is and how to calculate the annual revenue for new businesses and describe how you can find the annual revenue for a private company like Amazon.
What is Revenue?
Revenue is the income induced from normal business operations, calculated as the average sales price times the number of units sold. Revenue is also known as sales on the income statement which includes income from sales of products and services, interest from investments, and earnings from intangible assets. In essence, annual revenue is money a company makes from selling products and services during a given 12-month period before any deductions for the cost of the inventory you sold or business expenses.
Types of Revenue
There are two types of revenue your business might receive:
- Operating revenue is generated from a company’s core business operations and is the area where a company usually earns most of its income. What constitutes operating revenue varies depending on the nature of the business or industry. For instance, sales, rents, etc.
- Non-operating revenue is money earned from a side activity unrelated to your business’s day-to-day activities, like dividend income or profits from investments. There are a few types of non-operating revenue, including:
- Asset and capital sales
- Dividends:
- Interest:
- Contra Revenue
Additionally, to compare your business’s revenue subsequently, look at your operating revenue. This gives you more of an idea of whether your company is growing or declining since non-operating revenue is irregular.
How to Calculate Annual Revenue
Financial managers don’t account for expenses when calculating annual revenue because they determine it according to generally accepted accounting principles (GAAP). Annual revenue is essential because organizations track and calculate it to know whether the business is making a profit and growing. Analyzing annual revenue helps cost accountants create financial forecasts.
Hence, how calculating a company’s annual revenue means more than just arriving at a number to report to the Internal Revenue Service. This is finding this number that allows you to measure your company’s performance against itself in previous years as well as with the performance of competitors, and measure how much income your company is generating.
Steps-to-Step Guide to Calculate Annual Revenue
You can use the following steps to calculate annual revenue:
#1. Compile Product Trading Information
To calculate annual revenue, calculate the different revenue streams. For example, this can include subscription fees and equipment a company sells. So, when gathering this information, try to collate the selling price and quantity the company sold for each product or service.
#2. Determine the Total Revenue of Each Product
Next, calculate the total revenue of each product or service with this formula:
Selling price x number of units sold = total revenue of product or service
For example, if a company sells payroll software with an annual subscription price of $100 to 2,000 clients in one year, its annual revenue for the software is $200,000. If that same company also sells human resources administration software for $50 to 500 customers in the same year, the annual revenue for that product is $25,000. You can continue doing this calculation to determine the total revenue for each product or service for the company.
#3. Calculate the Total Annual Revenue
Finally, add the total revenue for each product and service to calculate the total annual revenue. Using the same example, you can add $200,000 to $25,000 to determine the company’s total revenue is $225,000. If the company also earned $300 from interest on an investment in the same fiscal period, its total annual revenue is $225,300.
Business Annual Revenue
Annual business revenue refers to the income produced by a business in the year before any expenses are deducted. Knowing your business’s annual revenue also allows you to track your company’s performance against itself in previous years, as well as against competitors. This is because revenue is the money earned by a company obtained primarily from your business’s sale of its products or services to customers.
In addition, without knowing how much money you’re bringing in, you won’t be able to tell whether your business is profitable. Business annual revenue is the starting point from which you can determine your net revenue, which tells you whether your company’s sales are indeed exceeding its costs, and is making a profit.
How Does Annual Business Revenue Work?
When calculating business revenue, you will add the money you made from your main business activities, such as sales of your products or services, as well as the revenue you earn from activities not directly related to your business, such as renting a floor of your building to another company. There are also two different ways to calculate annual revenue: It can be over a fiscal year, which is from whatever point in the year you start calculating, like July 1, to the same date the following year. Or, it can be a calendar year, which would start on January 1. Some businesses prefer to use one method over the other.
What Is Considered Good Annual Small Business Revenue?
People often think that entrepreneurs are making much more than the reality. The average small business revenue with no employees is reportedly $44,000 per year, and the average revenue of a small business with employees is $4.9 million in 2021.
Annual Business Revenue for New Business Credit
When your business is new, you might not have any revenue to speak of. And it’s OK to say on your application. Hence, acquiring a business credit card for a new business or side hustle is easier than you may think. This is because you don’t need a business plan or even any business income if you have good personal credit (a FICO score of 690 or higher)
That is to say, when filling out the “revenue” portion of a new business credit card application, make sure your new business looks it’s very best without stretching the truth. Annual business revenue for new business credit includes any money brought in from sales or services, sales of stock, or anything else that brings money into the business.
Annual Business Revenue for New Business Credit: Steps to Take
A business credit card can help you keep your business and personal expenses separate, offers access to a revolving line of credit, and can help you build your business credit profile. Here are the steps to take, and what you’ll need, to get a credit card for your new business or startup.
#1. Research and Select a Business Credit Card
The best business cards for startups generally combine flexibility with perks and bonuses. Start by researching your options and selecting a card that matches your needs and spending patterns. For instance,
- A business card with a 0% intro APR period can help you finance big purchases and other startup costs.
- A business travel card that earns you points or miles on flights, hotels, and rental cars can help finance future trips and make travel more comfortable.
- A cash-back business card with no annual fee is a great option for new businesses figuring out their expenses bonus points if the card has a generous welcome offer.
#2. Understand the Personal Guarantee
Almost all business credit cards require a personal guarantee. This means that if your new business fails, you’ll be on the hook for any balance, and the credit card issuer can go after your personal assets. This is the case even if your business structure otherwise protects you from liability for company debts, as with a corporation or LLC.
#3. Put Together your Application Information
Business credit card applications ask for both personal and business information. When you apply for your business credit card, be prepared with the following:
- Tax ID number
- The business’s name
- The legal structure/entity type
- Business address and phone number
- The date you started your business
- Total annual revenue for the business
- Type of industry
- personal information like name, address, date of birth, and Social Security number — for yourself and any individuals who own 25% or more of the business.
#4. Proceed with Building Business Credit
Opening a small-business credit card can be the first step toward establishing business credit for your new company. Similar to personal credit, a strong business credit score can unlock better rates and terms on loans, as well as on business insurance and with suppliers.
What Should I Put for Annual Revenue for New Business?
This includes any money brought in from sales or services, sales of stock, or anything else that brings money into the business. Make sure to not subtract expenses or taxes from the annual revenue (there’s no need to share profits or net revenue).
Annual Revenue Amazon
Are you curious about how much annual revenue Amazon makes? The retail giant generated a revenue of more than $469.82 billion in 2021. During the past few decades, Amazon has gradually expanded to become one of the biggest retail companies in the world. Now, Amazon provides individuals, small business owners, and corporations with an opportunity to make passive income on Amazon, diversifying their revenue streams. The annual revenue for Amazon is close to $470 billion in revenue every year. Amazon has been on a steady path of upward growth during the past few decades.
Additionally, as the internet has gotten more popular and easier to access, Amazon has simply created additional ways to generate its annual revenue. While its primary focus is still on providing people with products that are shipped right to their front doors, The company has grown into electronic readers, streaming services, and innovative home products to strengthen its presence in multiple sectors
Year Revenue ($bn)
- 2021 469.82
- 2020 386.06
- 2019 280.52
- 2018 232.88
- 2017 177.86
Factors that Affect Amazon Annual Revenue
It is clear that a wide number of factors affect the annual revenue and the ability of Amazon to operate. Some of these factors may act in their favor, while others are detrimental to the success of the company. This analysis has highlighted these key issues like,
- Local economic/political conditions
- International regulations on e-commerce
- Business licensing across borders
- Currency exchange restrictions
- Language/cultural differences
- Net neutrality and access to the Internet
- Optimizing inventory
- Good terms with shipping companies
- Demand forecasting
- Planning for increased shipping costs
- Risk of site crash due to increased traffic
- Extra staffing
- Technology
- Stock value
- Industry trends
- Data protection
- Energy consumption
- Taxation
- Online payment services
Is Annual Revenue the Same as Gross Income?
When comparing revenue vs income you should know that “revenue” refers to the total amount of money a company generates before removing any expenses. “Income”, on the other hand, is equal to revenues minus the costs of doing business, such as depreciation, interest, taxes, and other expenses.
How to Find Annual Revenue for a Private Company
Before we dive into best practices around how to find annual revenue for private companies, it’s important to first understand what a private company is and how it’s different from public companies. As this will dictate the type of data you need to find. This is because getting an edge over other successful private equity (PE) and venture capital (VC) firms means understanding how to identify and connect with prime investment-ready targets faster, earlier, and more effectively.
Hence, private companies don’t report their financials publicly, and since there’s no stock listed on an exchange, it’s often difficult to find the annual revenue of a company like Amazon. Because,
- In the U.S., private companies are not required to report or disclose financial or any other operational information to the Securities and Exchange Commission (SEC) or to the public.
- Private companies do have to file taxes, but tax filings are confidential and are not disclosed to the outside world.
- All stakeholders – employees, investors, customers, and partners – are tied into strong non-disclosure and confidentiality agreements.
Additionally, while investor-backed private companies often announce funding rounds and customer wins, that can give firms an idea of their size, growth, and revenue, bootstrapped private companies are tighter-lipped.
Steps to Find Annual Revenue for a Private Company
Using a variety of data sources will help you find and put together the scattered annual revenue of private company data into one cohesive analysis. Checkoff all of the following resources to build an informed understanding of potential opportunities that give you an edge over the competition:
#1. Private Company Websites
Today, virtually every company has a website. These websites typically outline the company’s products, solutions, management, investors, money raised, board members, open positions (in the Careers section), press releases, conference attendance announcements, and media coverage. Additionally, websites offer resources such as whitepapers, ebooks, videos, and blogs all of which provide key insights into a private company.
Many private companies, especially those in the B2C space, use social media as a key channel for customer acquisition, feedback, satisfaction, and retention. Therefore, monitoring a private company’s social media presence can offer additional insights, especially on its existing portfolio of customer-facing apps, products, and solutions.
#3. Online Job Sites
Most private companies use online websites (LinkedIn, AngelList, etc.) to recruit employees. Requirements for open job positions offer compelling details on the skill gaps that private companies are trying to fill, which may reveal product plans, technology direction, marketing strategies, geographic expansion plans, etc. Moreover, trends in the number and nature of advertised open positions are key indicators of private company growth and product/solution evolution.
#4. Online Employee Profiles
Employees at most private companies have profiles on professional networking sites such as LinkedIn, where they list qualifications and employment timelines, publish professional articles, or like/comment on others’ posts. Employee activity on professional sites often reveals a lot about a private company. When employees leave companies, many of them turn to workplace review sites (such as Glassdoor) to leave comments about their employer, their bosses and colleagues, and corporate culture all of which is valuable information for investors or acquirers.
#5. Trade Shows
Private companies attend industry conferences to scope out the competition, meet potential customers, and even connect with investors. Firms often review trade show attendee lists and go to events that target companies plan to attend. Once there, it’s possible to meet and strike up a conversation with their founders and executives to learn more about them.
What is a Good Annual Revenue for a Small Business?
In general, the average revenue is around $44,000 per year for a company with a single owner/employee. Two-thirds of these small businesses make less than $25,000 per year. Most of these businesses are based out of the home.
Is Revenue a Yearly Income?
Annual revenue is the amount of money a company makes during a given 12-month period from the sale of products and services. Annual revenue is total sales before any deductions for the cost of the inventory you sold or business expenses.
Related Posts
- SALES REVENUE: Definition, Formula, How to Calculate It & Difference
- GROSS REVENUE: Meaning, Evaluation, Formular, and Importance
- BUSINESS REVENUE: Meaning, Example, Difference & Calculator
- REVENUE MODELS: Meaning, Practical Examples, Types
- REVENUE MODEL: Definition, Types and Examples
References
- indeed.
- nerdwallet.
- businessmodelanalyst.
- .sourcescrub.
- investopedia.
