Revenue, also referred to as sales, is the amount of money a company brings in or earns before any expenses are taken out. From an accounting perspective, revenue typically consists of product and service sales on account or where the customer paid in cash.

Economic Engine

The most basic point about the importance of revenue is that without it, your company cannot earn a profit and stay viable in the long run. You need to collect revenue to justify the fixed and variable expenses you pay just to operate a business. In simplest terms, zero or low revenue leads to an unprofitable business and negative financial results.


Revenue is often examined more closely than profits when assessing the growth of a business. Investors want to see that a business is able to perpetually generate more sales over time as the company is promoted to an expanding audience. Flat or declining sales growth suggests that the company has stalled and offers limited hope for continued growth. Stagnant companies may produce near-term profit, but they don't attract the interest of new investors.


To qualify for loans and favorable interest rates on credit accounts, lenders need to see that you are able to generate steady revenue from regular business activities. This, along with assessments of your existing debt structure, help in their analysis. Poor revenue and weak attractiveness to lenders makes it difficult for a company to fund new projects and business activities. This makes it especially challenging to dig your way out of a tough spot.


Revenue also has critical psychological implications both internally and externally for your business. Employees want to feel confident in their employer and have a sense of security and stability in their jobs. Strong revenue production offers employees this feeling of comfort. Revenue affords similar comfort to business partners, suppliers, community members and other stakeholders impacted by your business. More confidence from stakeholders makes them more likely to take risks and make decisions to support your company.