How can I calculate revenue from cost and profit margin?

Question

Let's say I have a profit margin of 70% and expenses of $250 can I not calculate my estimated revenue?

I'm using this formula: Profit Margin = (Revenue - Expenses) / Revenue.

I'm trying to understand what my projected revenue would be given my profit margin and estimated cost.

I'm looking for an answer in the form of a formula for Revenue like R = ?.

This is probably elementary but any help is much appreciated. Thanks!

score 3 · Accepted Answer · answered May 20 '14 at 15:58

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$$\text{Profit Margin} = (\text{Revenue} - \text{Expenses}) / \text{ Revenue}.$$

We'll use $P$ for profit margin; $R$ for revenue; and $E$ for expenses.

$$\begin{align} P = \frac{R-E}R &\iff RP = R-E \text{ (provided } R \neq 0)\\ \\ &\iff RP - R = -E \\ \\ &\iff R(P - 1) = -E\\ \\ &\iff R = \frac E{1-P}\;\text{ (provided } P-1 \neq 0) \end{align}$$

Now just "plug in" your values: $P = 0.7$, $E = 250$, to obtain revenue.

answered May 20 '14 at 15:58

amWhy

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I think that is exactly what I was looking for. Thank you very much. – rmontgomery429 May 20 '14 at 16:06

score 2 · Answer 2 · answered May 20 '14 at 15:32

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Right. $0.7=(R-250)/R$. Multiply both sides by $R$ and solve for $R$.

answered May 20 '14 at 15:32

JPi

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Thanks. What would that look like as a formula: `R = ?` – rmontgomery429 May 20 '14 at 15:34

score 0 · Answer 3 · answered Jan 19 '17 at 20:57

Fee Type = Margin-Based Fee

Total Estimated Labor Cost USD 250,000

Margin % 50.0

Formula to calculate Total Estimated Revenue = Total Cost / (1-Margin%)

250,000 / (1-0.5) = 500,000

Margin = Total Estimated Revenue - Total Estimated Labor Cost

USD 500,000 - USD 250,000 = USD 250,000

Total Estimated Fee/Revenue USD 500,000

Margin USD 250,000

How can I calculate revenue from cost and profit margin?

3 Answers3