Revenue vs. Sales: Why the Difference Matters

Your top rep closes a big deal after months of hard work. Pulling in big money for the company has them on cloud nine. But when the company’s revenue statement comes in, they’re surprised to see that the deal isn’t included in the bottom line. What gives?

If you’re confused, don’t worry. Many sales professionals don’t realise that sales and revenue don’t always align. We’ll talk about what they are, why they matter, and how to keep your numbers growing — across all targets.

What you’ll learn:

• What is sales?
• What is revenue?
• What is the difference between revenue vs. sales?
• Revenue vs. sales in your financial statement
• How to increase your sales and revenue

What is sales?

At its simplest, sales is the exchange of something of value for currency. When talking about sales, you often hear these terms:

• Gross sales: Refers to the total amount of money you bring in from selling your products or services over a given time period. For example, a SaaS company may sell 10 yearly licences of its software for $1 million each. That’s $10 million in gross sales for the year.
• Net sales: This is the gross sales amount minus the cost of goods sold (COGS). If you sold $10 million in SaaS licences, as in the above example, and have $2 million in COGS, your net sales for the year would be $8 million.

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What is revenue?

Revenue is the total amount of money your business brings in or the top line on your income statement.

To come up with this total, add all the money you generate from sales, primary business activities, and non-operating revenue, such as profit from investments. The company can use this money, including recurring revenue, to cover costs like equipment purchases and employee compensation.

Revenue is more than just a single number, though. If you’ve ever read a corporate income statement, you’ve probably seen three different types of revenue:

• Gross revenue: Refers to the total amount of money you receive from sales and use of products or services. If you received $200,000 in payments for your products in March via ongoing subscriptions and sold an additional $100,000 in new products, your gross revenue amount for the month would be $300,000.
• Net revenue: This is your gross revenue minus your organisation’s operational expenses or COGS, including production and marketing costs. Using the example above: If you spent $70,000 to run the business in March, your net revenue would be $300,000-$70,000, or $230,000 for the month.
• Non-operating revenue: Some organisations bring in revenue from sources separate from their core business. This can be anything from grants and dividends to asset sales. If a technology company earns money from selling a building, for example, the amount of revenue from that sale counts as non-operating revenue. This is because it was not earned through selling products or services as part of normal operations.

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Revenue vs. sales: Highlighting the key differences

On the surface, it’s easy to assume that your total sales should be the same as your total revenue, but the number is typically different due to non-operating revenue. While revenue includes sales, it also accounts for deductions and investments.

Here are the key differences between the two:

• Income source: Sales totals come from money earned in exchange for goods or services. However, revenue also includes income from liquidated assets, such as the sale of stock, equipment, and property.
• Spending availability: Sales totals represent the amount closed in deals, but not necessarily the amount that’s been paid by customers. Revenue, however, is money that’s already in hand.

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Revenue vs. sales in your financial statement

Financial statements can be confusing, but they are also key to helping sales representatives track their progress. A company’s financial or income statement lists its revenue and expenses, showing its profit (revenue exceeding all expenses) or loss (revenue less than total expenses) for a given period.

All publicly traded companies must release a financial statement every quarter. They don’t all look the same, but common amounts included are:

• Total sales and revenue
• Cost of goods sold
• Gross profit
• Operating expenses
• Net revenue or loss

How do you keep track of all of this? Sales Cloud’s analytics capabilities make it possible to compile all sales and revenue data quickly and see forecasts in real-time. This can help you predict the numbers that might appear on your financial statements, prepare for upcoming quarters years, and make decisions to strengthen the financial health of your company.

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How to increase your sales and revenue

Sales and revenue are more than just numbers. They’re indicators of how healthy and profitable your business is. When your business is strong, you can expand market share and build new products, which is critical for growth. So how do you actually improve your sales and revenue? Here are some tips to consider:

• Determine your go-to-market strategy
  You can create a profitable go-to market strategy., or method for creating a new product and taking it to market, by building buyer personas, conducting competitive research, and identifying the right sales channels to start marketing your offering.
• Use discounts
  Discounts are an effective way to bring in new buyers. But you don’t want to over-discount, or your sales won’t be enough to cover expenses. Take a close look at your overhead and see how much you can discount and for how long before selling at full price.
• Consider a subscription model
  Subscription models provide regular and recurring revenue, which can help increase sales and revenue without having to continually sell new products.
• Help your sales team meet their quota with enablement
  Sales quotas are goals sellers are expected to meet (typically a certain amount in sales each quarter). Set achievable quotas and help your team hit them by offering enablement programs and resources that make selling easier.
• Set an accurate sales forecast
  A sales forecast estimates how much your business will bring in during a set time period. This is a key piece of your revenue puzzle — if you spend more than you bring in, you’ll be in the red. And if you know that in advance, you can change your strategy to ensure you stay in the black.

All of this is significantly easier when you use a CRM versus an old-school spreadsheet. With all of your sales data in one place, you can drive forecast accuracy, grow your pipeline, and optimise revenue in real-time.

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Drive growth in sales and revenue

Everyone’s happier when your numbers are growing — your C-suite, sales staff, and investors alike. Sales and revenue are distinct but intertwined, and both are critical for the health and longevity of your business. Create a scalable strategy that helps you grow both numbers, leaning on an AI-powered CRM to handle the heavy lifting.