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<\/a><\/p>\nHere, we\u2019ll take a closer look at the difference between revenue and profit, why it matters in sales, and how to get from revenue to profit. <\/p>\n
Table of Contents<\/p>\n
- \n
- What is the difference between profit and revenue?<\/a><\/li>\n
- Why does revenue vs. profit matter to salespeople?<\/a><\/li>\n
- How to Get From Revenue to Profit<\/a><\/li>\n
- Revenue vs. Profit Example<\/a><\/li>\n<\/ul>\n
<\/a> <\/p>\n
Revenue<\/a> is a top-line number on financial statements, and sales teams are often measured against it. When you close a $100,000 deal, that entire amount counts towards the overall revenue figure. Profit<\/a> is the bottom line that ultimately determines a company\u2019s financial health, and you get the final number after all costs are subtracted from total revenue (more on this process here<\/a>). <\/p>\n
![\"revenue](\"http:\/\/nurseagence.com\/wp-content\/uploads\/2025\/03\/revenue20vs20profit20comparison.jpg\")
<\/strong><\/p>\nFactors Impacting Revenue and Profit<\/h3>\n
There are various factors that impact revenue and profit numbers, including demand (increased vs. lowered), pricing (higher price points can turn buyers away), competition, and economic conditions. Sales-specific factors that impact revenue include: <\/p>\n
- \n
- Deal size:<\/strong> larger deals equals more revenue<\/li>\n
- Sales volume:<\/strong> more deals means more revenue<\/li>\n
- Pricing strategy:<\/strong> higher prices mean more revenue per deal<\/li>\n
- Discounting practices<\/strong>: more discounting reduces revenue<\/li>\n
- Upselling and cross-selling<\/strong>: additional products\/services boosts revenue<\/li>\n
- Retention<\/strong>: renewals impact recurring revenue<\/li>\n
- Contract terms<\/strong>: multi-year deals can increase total contract value<\/li>\n<\/ul>\n
Everything that influences revenue will influence profit, but there are additional factors that come into play once you have your revenue numbers. For example, higher operational costs or increased tax and interest rates will all impact final profit numbers. Sales-specific activities that impact profits include:<\/p>\n
- \n
- Product\/service mix: <\/strong>some offers have higher margins<\/li>\n<\/ul>\n
- \n
- Sales cycle length: <\/strong>longer sales cycles increase acquisition costs<\/li>\n<\/ul>\n
- \n
- Customer acquisition cost: <\/strong>higher CAC reduces profit<\/li>\n<\/ul>\n
- \n
- Sales compensation: <\/strong>commission structure impacts profitability<\/li>\n<\/ul>\n
<\/a> <\/p>\n
Why does revenue vs. profit matter to salespeople?<\/h3>\n
As a salesperson, having a clear understanding of the difference between revenue<\/a> and profit<\/a> is essential because it helps you be strategic. For example: <\/p>\n
- \n
- You learn to prioritize deals with the best profit potential, not just high-ticket revenue numbers. <\/li>\n
- You understand how to negotiate strategically because any concessions you make will impact the bottom line (profit). <\/li>\n
- It helps you learn to qualify effectively and choose clients with lower acquisition and servicing costs, AKA the clients that cost you less. <\/li>\n
- It helps you streamline your sales process because shorter sales cycles mean lower associated cycle costs.<\/li>\n<\/ul>\n
<\/a> <\/p>\n
How to Get From Revenue to Profit<\/h2>\n
You can\u2019t get your final profit number without revenue, but there are a few subtractions along the way. Let\u2019s follow the money from the moment you close a deal to see how revenue transforms into profit. <\/p>\n
I\u2019ll go through the steps based on an imaginary deal we just closed with a $500,000 ticket price (yay, go us!). I recommend downloading HubSpot\u2019s free profit & loss statement template<\/a> because it\u2019ll help you contextualize where these numbers would go on an income statement and why it\u2019s important to go through every single step.<\/p>\n
![\"Screenshot](\"http:\/\/nurseagence.com\/wp-content\/uploads\/2025\/03\/Screenshot202025-03-0620at2011.23.0020AM.png\")
<\/p>\nDownload the free template here<\/a>.<\/p>\n
Starting With Gross Sales<\/h3>\n
Gross sales are the most fundamental measure of income, without accounting for allowances, discounts, and returns. Although it is a type of revenue, it doesn\u2019t accurately reflect a business\u2019s income and usually isn\u2019t listed on an income statement. <\/p>\n
In this case, our gross sales are $500K.<\/p>\n
Getting from Gross Sales to Net Sales (Revenue)<\/p>\n
Net sales is a more practical reflection of overall revenue, and it accounts for all the sales a company makes in addition to three key factors that can reduce the initial sale amount: <\/p>\n
- \n
- Allowances:<\/strong> Retroactive discounts a buyer receives after they discover and report some sort of defect with a product. For our example, let\u2019s say we issue our imaginary client a $15,000 credit (allowance). <\/li>\n
- Discounts<\/strong>: Price reductions a seller might offer a buyer in exchange for immediate or early payment. Since our client signed a multi-year contract, they get a 5% ($25K) discount on the $500K.<\/li>\n
- Returns<\/strong>: Partial or full refunds buyers receive for sending a product back to a buyer. Lets say our client isn\u2019t fully satisfied, so we issue a $20K refund.<\/li>\n<\/ul>\n
Accounting for those three adjustments, I now have a clearer picture of our deal’s actual revenue (net sale): $440,000 ($500,000 – $60,000 in total deductions). If you\u2019re following along with our profit & loss statement template<\/a>, $440K is what you\u2019d record in the cell next to Sales<\/em>.<\/p>\n
$60K is a rather hefty deduction, which emphasizes the importance of contract negotiations for sales teams when closing deals. <\/p>\n
Check out this article<\/a> for more information on the difference between gross and net sales.<\/a><\/p>\n
Getting from Net Sales to Gross Profit<\/h3>\n
- Discounts<\/strong>: Price reductions a seller might offer a buyer in exchange for immediate or early payment. Since our client signed a multi-year contract, they get a 5% ($25K) discount on the $500K.<\/li>\n
- Allowances:<\/strong> Retroactive discounts a buyer receives after they discover and report some sort of defect with a product. For our example, let\u2019s say we issue our imaginary client a $15,000 credit (allowance). <\/li>\n
- Sales compensation: <\/strong>commission structure impacts profitability<\/li>\n<\/ul>\n
- Customer acquisition cost: <\/strong>higher CAC reduces profit<\/li>\n<\/ul>\n
- Sales cycle length: <\/strong>longer sales cycles increase acquisition costs<\/li>\n<\/ul>\n
- Sales volume:<\/strong> more deals means more revenue<\/li>\n
- Why does revenue vs. profit matter to salespeople?<\/a><\/li>\n
![\"how](\"http:\/\/nurseagence.com\/wp-content\/uploads\/2025\/03\/revenue20to20profit.jpg\")
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