Owning a business is easy, but running a business is not. Making money isn’t easy, but managing it is even harder. Here, we will introduce you to one of the most important financial metrics for tracking the performance of a business—net revenue.

There are hundreds of tools available online to help you track this particular financial metric, and choosing the right tool has never been harder. We discuss this metric in depth, and, to make it easier to track, we recommend Baremetrics.

Baremetrics will provide your business with a single dashboard for monitoring various metrics. You can see your gross revenue, MRR, net revenue, ARR, LTV, total customers, and more directly on your Baremetrics dashboard. Check out the demo account here

## Net revenue

Net revenue is the total revenue earned from the sale of your product minus returns and discounts. Some businesses also get revenue from shares, interest, or other sources. These are not included in net revenue.

Net revenue is calculated based on the amount earned only from your core business. It does not take expenses into account such as licensing fees, employee salaries, and rent. This means that net revenue gives a rough estimate of how your business is doing and the market share that your business holds in your domain. It is also used to calculate your net income once you have tallied all the expenses you have incurred.

## Net revenue simplified

Net revenue is simply your net sales number—the amount of money you have taken in after all discounts, returns, etc. have been accounted for. Although high revenue is the first step to high profitability, without understanding your expenses, you cannot jump to the conclusion that your company is financially healthy.

## Example of net revenue calculation

Before we can calculate the net revenue, we need to calculate the gross revenue, which equals the sum of all sales transactions without discounts or refunds. Let’s assume you provide a SaaS service. In a particular month, your company has 1,000 subscribers at a monthly price of \$200 each. So, gross revenue is \$200,000. In addition, assume that it costs you \$100 per customer to render your services.

Of the 1,000 subscribers, 200 received an introductory discount price of \$150. This is a total of \$10,000 in discounts. In addition, 10 customers cancel their service in the first week for a full refund. The cost of returned services is \$1,000.

The mathematical formula for net revenue would look like this:

Net Revenue = Gross Revenue – (Returns/Refunds + Discounts  + Product Cost)

In the above example, your net revenue = 200,000 – (10,000 + 1,000 + 100,000)

= \$89,000

 Gross Revenue 1,000 × 200 200,000 Costs of Services Rendered 1,000 × 100 100,000 Discounts 50 × 200 10,000 Returns 10 × 100 1,000 Net Revenue 200,000 – (100,000 + 10,000 + 1,000) 89,000

## Significance of net revenue

### 1. What is the importance of net revenue?

Net revenue can be calculated using the amount earned only from your core services. It does not take expenses into account such as licensing fees, employee salaries, and rent. This gives you a rough estimate of how your business is doing and the market share that your business holds in your domain.

### 2. How does it differ from Gross Revenue?

Gross Revenue is the overall amount that you transacted by selling your product but does not exclude the important factors of discounts and refunds. With just gross revenue, you will not have as clear an idea of how your business is doing.

### 3. When should one use net revenue?

Net revenue is important for every aspect of the sales side of your business. It is important to track changes to revenue as you change prices, adjust your marketing strategy, etc., to see whether your decisions are having a positive effect. You should also take a particularly close look at net revenue when you are offering a new service plan to see if it is finding new customers or only cannibalizing clients signed up to other, potentially more expensive, plans.

Baremetrics measures churn, LTV and other critical business metrics that help them retain more customers. Want to try it for yourself?

## Online tools for net revenue analysis

Baremetrics is a comprehensive tool that will help you visualize your net revenue. With this tool, you will even be able to prevent losses from failed payments and identify churn metrics to understand why your customers are leaving. With its accurate financial metrics, Baremetrics provides comprehensive revenue monitoring for your business

Baremetrics is not just for net revenue analysis and trend metrics, but also provides 26 total metrics and offers everything you need to gain insights on how your business is performing. Baremetrics has deeper insights to pick up even the smallest metrics that might help your business. When compared with Authorize.net, Baremetrics tracks your MRR, churn, total number of customers per subscription, and a lot more. Check out this demo account where you can go and play with the Baremetrics dashboard without even signing up!

In addition to the 26 metrics it monitors, Baremetrics offers 8 data-boosting features so you can get more out of your metrics. Check out all the metrics that Baremetrics offers.

One of the significant metrics for a SaaS business is Monthly Recurring Revenue (MRR), which shows the stability of your business.

Churn is the loss of customers or revenue. Baremetrics monitors your Net Revenue Churn. This metric captures the percentage of revenue that is lost over a certain period of time from existing customers. Revenue loss could be because of cancellations, failed charges, and downgrades.

## Payment gateways with Baremetrics

Amazon Pay is an online payment processing service that allows your customers to pay for your products without exposing customer details such as credit card information and contact details. Baremetrics provides an easy solution to pair up with Amazon Pay to accurately monitor your finances and perform net revenue analysis with Amazon Pay.

Baremetrics also offers options to utilize Braintree’s payment gateway to track your Net Revenue Churn. With their widespread metrics such as MRR, churn, and subscriptions, Baremetrics is your one-stop dashboard for all your revenue monitoring needs.

## Conclusion

This article explores essential finance concepts and tools that can assist in monitoring your business performance. By looking into your net revenue, you can gain insights on the products that generate higher profits as well as those that produce high expenses along with high revenue. Supported by Baremetrics tools, you will be able to identify your operating cash flow to balance the financial health of your business.