Calculating your turnover
When do you have enough turnover to keep your business running? And do you know how much turnover you need to achieve that? On this page, you can find out what turnover is, how to calculate it, and how much you need to sell to cover your costs and make a profit.
What is turnover?
The turnover of your company is its total income from the sales of products or services over a certain period. This is usually per month, quarter, or year. This is called gross turnover.
The difference between gross and net turnover
Gross turnover is a simple calculation: the price multiplied by the number of products sold, or hours worked. For example:
- You charge €75 per hour
- You work 1,200 hours in a year
Your gross annual turnover is: 1,200 x €75 = €90,000 (excluding VAT).
Net turnover is gross turnover minus sales costs (such as purchase costs, material costs, discounts or returns). For example:
- You sell products worth €20,000. That is your gross turnover.
- The purchase costs are €8,000.
Your net turnover is then: €20,000 - €8,000 = €12,000
VAT is not included in your turnover
The VAT on your sales invoices (9% or 21%) goes to the Netherlands Tax Administration. This does not count as income for you. Your turnover is the total value of your sales excluding VAT.
Turnover is not the same as profit
Turnover is all the money your business receives from the sale of products or services.
Profit is what remains after you have deducted all business costs and taxes from your turnover.
Why calculate turnover?
Your turnover provides insight into:
- whether your business is growing or shrinking
- whether your rates or prices are right
- how many jobs or products you need to sell to make ends meet
It helps you plan better and see what is coming in and going out. And whether your planned turnover is realistic and achievable with the resources you have. This allows you to make adjustments in good time. For example:
- you run a bike hire business and hire out 5 bikes every working day for €8 per hour
- so, your maximum daily turnover is €320 (5 bikes x 8 hours x €8)
- your monthly turnover is no more than €6,400
- You have calculated that you need €7,000 per month to cover your business costs and personal expenses.
In this example, you are €600 short each month. Because you have done the calculations in advance, you can avoid falling short of your turnover target for the whole year. For example, by renting out more bikes or increasing the rental price.
How do I calculate how much turnover I need?
Your minimum turnover is the amount of turnover you need to live on and cover your costs. To calculate this, you need to consider 3 factors:
- income: how much money you want to have left over to live on
- costs: your business expenses (such as office rent, purchasing costs, and insurance).
- income tax: on average, an entrepreneur pays around a third of their profit in income tax (but this varies depending on the situation)
An example:
- you want to be left with €24,000 net per year
- you have €12,000 in expenses
- together that makes €36,000
Because you also have to pay tax, you need more turnover than €36,000.
This is how you calculate your minimum sales target.
Ways to estimate your turnover
There are several methods to estimate your turnover. The sector you operate in determines which method to choose. Do you work on an hourly rate? Then your calculation method will be different from someone who sells products, for instance in a bar or a shop.
Estimate the number of customers, and multiply by the average amount spent per customer. For example:
- a lunchroom opens 6 days a week
- it closes 4 weeks a year for holidays.
- On average, there are 30 customers a day, spending €15 on average
- 30 x €15 = €450 a day
- x 6 days = €2,700 per week
Total turnover: 48 weeks = €129,600 turnover per year.
Calculate the turnover share per product group. Multiply the number of products x their sales price. For example:
- You run a computer store, that opens 6 days a week, 48 weeks a year.
- You sell 3 laptops costing €700 each per day in your computer shop
- 3 x €700 = €2,100 per day
- 6 days a week = €12,600 per week
- 48 weeks a year = €604,800 in annual turnover
- You also sell 2 tablets costing €400 each per day
- 2 x €400 = €800
- 6 days a week = €4,800
Total turnover: €604,800 (desktop computers) + €230,400 (laptops) = €835,200 gross turnover per year.
Billable hours are hours you can charge to your client. Multiply the number of billable hours by your hourly rate. For example:
- You work as an advisor for 8 hours a day and 5 days a week.
- Per year, you take 30 days off. So, in total you work for 46x5 = 230 days a year.
- The number of hours per year is 230 x 8 = 1,840 hours.
- You spend 940 hours on administration, business development and travel to clients.
- That leaves 900 hours that you can bill to your clients (billable hours).
Total turnover: 900 billable hours x hourly rate of €100 = €90,000 per year.