Annual turnover in business is the total income a company earns from selling its products or services over one financial year, before subtracting any expenses or taxes.

Simple definition

  • Annual turnover = total sales revenue your business brings in over 12 months.
  • It is also called gross revenue or total sales , because it does not deduct costs like rent, salaries, or materials.

In short: it answers the question, “How much money came into the business from sales this year?”

What annual turnover is used for

Businesses and accountants look at annual turnover to:

  • Check how well the business is performing in sales compared with previous years.
  • Work out gross profit, using:
    Gross profit=Annual turnover−Cost of goods sold (COGS)\text{Gross profit}=\text{Annual turnover}-\text{Cost of goods sold (COGS)}Gross profit=Annual turnover−Cost of goods sold (COGS)
  • Decide on growth plans, marketing spend, or cost-cutting measures.
  • Meet legal and tax requirements, such as VAT or GST registration thresholds in some countries.

How to calculate annual turnover

The basic idea is to add up all sales for the year.

  1. Choose the financial year (for example, April to March or January to December).
  1. Add all income from selling products and/or services during that period.
  1. Include any extra invoiced amounts such as admin or shipping fees that customers pay.

Example:

  • A business sells 5,000 units at 45 each in one year.
  • Annual turnover = 5,000×45=225,0005{,}000\times 45=225{,}0005,000×45=225,000.

Turnover vs profit (common confusion)

Turnover and profit are often mixed up but they are not the same:

  • Turnover : All money from sales over the year (top-line figure).
  • Profit : What is left after subtracting all costs (materials, wages, rent, taxes, etc.) from turnover (bottom-line figure).

A company can have high turnover but low profit if its costs are also very high.

Other meanings of “turnover” in business

The word “turnover” can also be used in a few other ways, which sometimes causes confusion:

  • Inventory turnover : How many times a business sells and replaces its stock in a year. Low inventory turnover can signal weak sales or overstocking.
  • Employee turnover : The percentage of staff who leave the company in a year.

Employee turnover %=Number of staff who leftAverage number of staff×100\text{Employee turnover %}=\frac{\text{Number of staff who left}}{\text{Average number of staff}}\times 100Employee turnover %=Average number of staffNumber of staff who left​×100

But when people say “annual turnover in business” , especially in small business and accounting contexts, they almost always mean total yearly sales income.

TL;DR:
Annual turnover in business is the total money your company earns from sales over a year, before any expenses, and it is a key measure of size, performance, and tax obligations.

Information gathered from public forums or data available on the internet and portrayed here.