Revenue

Also known as: Top LineSales RevenueTotal RevenueGross RevenueIncome

Total Revenue = Units Sold × Price Per Unit

💡The Concept

Revenue is the total income generated from selling your product or service before any expenses are deducted. It is the top line of your income statement and the first number investors look at. Revenue quality matters as much as revenue quantity: $1M in recurring subscription revenue is worth 8-15x as a valuation multiple, while $1M in one-time services revenue is worth only 1-3x. Slack grew to $12M ARR before raising its Series A because they focused on revenue quality — recurring, low-churn enterprise contracts — not vanity revenue spikes.

⚠️The Trap

The trap is celebrating revenue growth while ignoring the cost of generating it. A startup doing $1M in revenue but spending $1.5M to get there is dying — it just doesn't know it yet. Revenue is vanity; profit is sanity; cash is reality. Also, one-time revenue spikes (viral launches, seasonal sales, a single large contract) are not sustainable growth. If you strip out the spikes, what's your underlying recurring revenue trend?

🎯The Action

Track revenue by three dimensions: (1) Source: organic vs paid vs referral — know which channels actually generate revenue, not just traffic. (2) Type: recurring vs one-time — only recurring revenue drives SaaS valuations. (3) Cohort: does each monthly cohort's revenue grow, stay flat, or shrink over time? If older cohorts are shrinking, you have a retention problem hidden by new customer acquisition.

⚡Pro Tips

Revenue recognition ≠ cash collected. GAAP (Generally Accepted Accounting Principles) says you 'earn' revenue when the service is delivered, not when cash is received. A $120K annual contract signed in January generates $10K/month in recognized revenue — but cash might arrive lump-sum, quarterly, or not at all if the client doesn't pay.

Track 'revenue per employee' as an efficiency metric. Best-in-class SaaS companies generate $200K-400K revenue per employee. Below $100K/employee suggests you're either overstaffed or undermonetized.

Revenue concentration risk: if your top 3 customers represent more than 30% of revenue, losing any one is a crisis. Diversify your customer base to avoid single-customer dependency.

🚫Common Myths

✗Myth: “Revenue growth solves all problems”

✓Reality: Revenue growth at negative unit economics accelerates your death, not prevents it. Every new customer Pets.com acquired cost more than the customer generated in lifetime revenue. They grew to $110M revenue and still went bankrupt. Growth amplifies your business model — if it's broken, growth amplifies the brokenness.

✗Myth: “Revenue is the same as bookings”

✓Reality: Bookings are signed contracts; revenue is earned income. A $1.2M 3-year contract is $1.2M in bookings but only $400K/year in revenue ($33.3K/month). Companies that confuse bookings with revenue overstate their business by 2-3x and face painful reckoning when the board asks for GAAP financials.