Thrive or Dive: Why the Difference Between Revenue vs. Profit Matters

You start a business, and people love what you’re selling. Money comes rolling in. Congratulations! There’s one important question to consider, though: Is that money revenue or profit?

If you want to keep your winning streak going, this matters. In fact, understanding the key differences between revenue vs. profit is key to whether your business thrives or dives.

Let’s start with a chart that provides a quick comparison of the two terms.

Revenue is the income generated by selling your products or services before you start subtracting expenses. It’s sometimes called ‘top line’ because you’ll find it at the top of your income statement. Tracking revenue helps you see how well your offering is selling and whether demand is increasing, staying steady or slowing down.

Depending on your business, you might track different types of revenue. Here are some of the most common categories:

• Gross revenue: Your total sales, accounting for all income generated from customers, before any discounts or refunds are applied.
• Net revenue: Sometimes called net sales, this is your gross revenue minus any discounts, returns or refunds.
• Non-operating revenue: This is income that comes from sources outside your day-to-day business activities. This could include rental income, interest or investment returns.
• Average revenue per unit (ARPU): This metric is used to understand the average revenue generated per unit sold. (The meaning of ‘unit’ will vary depending on the business.)
• Monthly recurring revenue (MRR): This metric focuses on the predictable, recurring revenue a business generates every month.
• Annual recurring revenue (ARR): Like MRR, ARR is revenue your business generates every year. This would be applicable if your business offers a membership subscription that collects an annual fee.

You’ll notice that expenses haven’t been accounted for yet. All of these revenue categories represent the income you’ve created via sales. Let’s go a step further and break down how to calculate each type of revenue.

Depending on your business model, there are a few ways you can calculate your revenue. The most common are as follows:

• Gross revenue: Gross revenue = total sales x sales price per unit
• Average revenue per unit or user: ARPU = total revenue / total number of customers or units
• Monthly recurring revenue: MRR = average revenue per unit or customer x total customers or units
• Annual recurring revenue: ARR = MRR x 12

Understanding each type of revenue and keeping a consistent record will help you understand how healthy your business is and whether you’re utilising your resources effectively.

Revenue is influenced by a mix of decisions you control and conditions you don’t. Both impact how much money your business brings in each month and how predictable that income is over time.

Below are some of the main internal and external factors that shape revenue.

• Pricing strategy: The price you set affects demand and margins, as well as how your product is positioned.
• Sales volume and pipeline health: Strong sales activity feeds consistent revenue, while slow periods create gaps. We surveyed service professionals for our State of Service Report; they predict that AI agents will boost upsell revenue by 15%.
• Marketing effectiveness: Clear messaging, relevant campaigns and targeted outreach help bring in qualified customers.
• Product or service quality: Higher quality boosts repeat purchases and referrals, which strengthen revenue over time.
• Customer experience and retention: Smoother onboarding, helpful support and ongoing engagement reduce churn and stabilise monthly income.
• Operational capacity: If your team, tools or processes can’t keep up with demand, revenue potential can be capped.

• Market demand: Shifts in customer behaviour or industry trends can increase or decrease consumers’ appetite for your offering.
• Competition: New entrants, pricing changes or differentiated products can impact your revenue.
• Economic conditions: Inflation, interest rates and overall consumer confidence influence buying decisions.
• Industry or regulatory changes: Updates to legislation, standards or compliance rules can affect how you sell your products or services.
• Market expansion or consolidation: New markets, mergers or acquisitions can open up opportunities or increase pressure.

While you can’t control every factor, you can improve how you respond. Salesforce CRM brings all your sales, marketing and customer data into one place, helping you spot trends early, strengthen demand and build more reliable revenue streams.

Profit is the money a business has left over after all expenses are subtracted from revenue. Gross profit is located at the top of an income statement, and net profit is located at the bottom of an income statement. So, when you hear someone ask, ‘What’s your bottom line?’, they want to know what profit your business has made.

Even with high revenue, if your direct costs are close to or higher than what you're bringing in, you could end up with little or no profit.

Profit can be viewed in three main ways. Each one gives you a different understanding of how your business is performing.

Gross profit is the money you keep after subtracting the direct costs of producing your product or service. This includes materials, packaging or contractor costs tied to delivery. It helps you see how profitable your core offering is before you factor in your wider expenses.

Operating profit takes your gross profit and subtracts your operating expenses, such as salaries, rent, software, utilities and marketing. It shows how efficiently you’re executing your core business operations from day to day and whether your operations support sustainable revenue.

Net profit is the final result after every cost is deducted, including interest, taxes and any one-off expenses. It shows how much you actually keep and what you can reinvest or save for future growth. This figure is often called net income. It’s one of the clearest indicators of your overall financial health.

Once you have all your revenue and costs, you can calculate your gross, net and operating profits using the following calculations.

• Gross profit: Gross profit = net revenue - cost of goods sold (COGS)
• Net profit: Net profit = gross profit - operating expenses (subtract interest and taxes, if necessary)
• Operating profit: Operating profit = gross profit - operating expenses

Your profit stems from your revenue. All the factors impacting your revenue that were shared above will also affect your profit. The following particulars directly impact profit.

• Economies of scale: This principle states that as a business grows and production volume increases, the average cost per unit of production decreases. That means higher profit margins.
• Efficiency and effectiveness: Streamlined operations and well-trained employees contribute to reduced costs and better productivity.
• Business model superiority: A well-defined business strategy and a strong business model that nails both revenue generation and cost management can deliver maximum profits.

Revenue is the total amount your company earns before costs. Profit is what’s left after subtracting all operational expenses. Here are some other differences between revenue vs. profit and why they matter.

An obvious difference is where they’re located on your income statement: revenue at the top, and profit at the bottom.

The placement reflects the logical flow of business activities. You want to see how much money you made from your sales (revenue). To determine your profit, you subtract everything you have to pay for to keep your business afloat.

Revenue helps sales teams forecast the supply of goods they need to meet future demand. Without a clear understanding of revenue trends, it’s difficult to predict how many new buyers you’ll need to attract in the coming months.

Underestimating demand could lead to a frustrating scenario in which potential customers are eager to sign up or buy your product, but you don’t have the stock or can’t onboard them due to insufficient customer support staff.

Overestimating demand isn’t great, either. You might invest heavily in additional stock and hire a larger support team, only to find you have excess products or capacity that you’re not utilising.

Sales professionals use a revenue intelligence platform to help track trends and compare data period over period, which lowers their risk of overspending or coming up short.

Let’s see how the dynamics of revenue and profit play out with a simplified income statement for a local cafe in downtown Sydney.

After a bustling work week, this local cafe brings in $3,400 from coffee sales and $6,300 from cabinet food.

Total revenue: $9,700

The cost of goods sold (COGS) will include the cost of coffee beans, milk, flavour shots and the cost of buying pastries from another local provider.

For this coffee shop, the COGS is $1,500.

To calculate gross profit, the cafe needs to subtract the total COGS from the total revenue.

Gross profit: $9,700 (revenue) - $1,500 (COGS) = $8,200

Now, to find the final profit that this cafe made, we’d need to subtract the operating expenses, which for this cafe are:

• Salaries
• Rent
• Marketing
• Utilities
• Insurance
• GST (Goods and Services Tax, which is 10% for a cafe in NSW)

All of these operating expenses add up to $3,000.

We can now work out the net profit by subtracting the operating expenses from the gross profit.

Net profit: $8,200 (gross profit) - $3,000 (expenses) = $5,200

You can even take it a step further and calculate the net profit margin with the following formula:

Net profit margin: (Net profit ÷ Revenue) × 100 = 53.6%

The relationship between revenue and profit is unique to each business. To use a flight metaphor, revenue is the thrust to beat the drag when flying. Profit creates the lift to overcome gravity and keep you airborne.

When you’re able to understand your revenue and profit, you’re able to make informed business decisions. To get an accurate view of your revenue and profit, you’ll need to have a unified view of all your sales data. That’s where Agentforce Commerce can help.

Customers who started using Agentforce Commerce saw a 29% increase in digital revenue by shifting from legacy channels. Watch the demo to learn more.