Why is revenue a good indication of success in a business?

Answer 1

Well, the ultimate goal is to make a profit. And since the formula is revenue - expenses = profit, it's pretty obvious that increasing your revenue is good for profit.

Increasing revenue is also a sign of growth, which indicates the company has a good future ahead of it.

Yes, you can increase profit by cutting expenses, and that will work, but it's not something you can keep doing. You can only cut so much and for so long, while there is no real limit in revenue growth, except for what you sell.

Answer 2

In the long run revenue is often a more useful measure than profit of the success of a business... if revenue is growing year-on-year then that suggests the business is expanding and conquering new markets and generally flourishing.

Ultimately of course the goal is to make a PROFIT, but in an industry with high start-up costs etc it is quite reasonable (depending on the circumstances) to describe a LOSS-MAKING business as successful, if revenue is growing year-on-year and the loss is incurred by buying machinery/equipment/people which will help the business to grow and later on turn a profit.

This is why banks give loans to businesses for capital start-up costs: not everybody can make a profit straight away. Revenue (or a projection thereof) is one of the most important measures the bank will use to determine whether to lend.

Bear in mind it is also very possible (and quite common) for a dying business to be enjoying huge profits... but if you take your eye off the ball and stop building the revenue, sooner or later the customers will drift away, contracts will come to an end, and the profit will quickly turn to a crippling loss.

The successful businessman aims for profit, but isn't afraid of investing and keeps a very close eye on revenue growth.

The ideal position, of course, is huge revenue, huge customer base, streamlined work, and low costs... but we don't all work for Coca-cola ;-)

Answer 3

It isn't always a good indication -- but for many companies revenues and profits are directly related. Since revenue is easily observable, it is the number that a lot of people look at.

Answer 4

In short, you can always trim costs and general overhead, it isn't that easy to get more people to buy your product. Once a business is up in rinning (and making a lot of revenue) success generally isn't too far behind.
Look at the tobacco industry...those guys have A LOT of revenue and multi billion dollar settlements each year that even then only add up to a fraction of their total PROFIT...much less their total REVENUE.

Money is good. Costs are bad. Lots of money and lots of costs is ok. Equally lots of money and costs that were just a little smaller than last wk/mth/yr = MARVELOUS!

Answer 5

Its not. Profit and cash flow are most commonly used indicators. Revenue is however a good indicator of growth.

Answer 6

The primary purpose of any business is to make a profit. Without it, it ceases to burden HM Revenue & Customs with tiresome payments of Corporation Tax, Vat returns and other such irritations that our sterling tax collectors have to put up with.

Answer 7

revenue is profit and so... business needs profit in order to become success

Answer 8

lol...... wouldn't you feel good if you get a big check after closing a difficult deal?????

I LOVE MY REVENUES, THE BIGGER THE CHECK THE HAPPIER I GET!!!!