What is Business Turnover?

What is Business Turnover?

If you've ever sat in a meeting pretending to understand what "turnover" means while silently wondering if it's the same thing as profit — you're in good company. Business turnover is one of those terms people throw around confidently, but not everyone actually grasps what it involves. The good news is, it's not that complicated once you cut through the fluff.

What Does “Business Turnover” Actually Mean?

Turnover, in business speak, is your total sales income over a period of time — usually a year. It’s the top line, not the bottom one. It tells you how much money your business has brought in before you subtract any costs, taxes, or expenses. So if your business sells mugs for £10 each and you sell 10,000 mugs in a year, your turnover is £100,000 — simple as that.

It’s not your profit. It’s not what you take home. It’s not how much is left in the bank. It’s just the total amount people paid you for goods or services. Think of it as the size of your pie, not how much of it you get to eat.

How Does Turnover Work?

Turnover is typically calculated over a financial year, and for many businesses, it’s the first number on the income statement. Whether you’re a sole trader or a big limited company, turnover is the figure that shows how much money flowed into the business from trading activities.

If you run a services-based business — say, a consultancy — your turnover is the total amount you billed clients during the year. If you sell products, it’s the total value of those sales before you deduct costs like stock, staff, rent, or that one dodgy printer you regret buying.

Turnover can also be split into different types: gross turnover (the total before any deductions) and net turnover (after certain adjustments like returns or discounts). But unless you're deep into accounting, most people refer to gross turnover when they talk about "how much the business made".

Understanding Turnover vs. Profit

This is where people get tripped up. Turnover is not profit. You can have high turnover and still lose money if your costs are through the roof. Imagine running a café that takes £250,000 a year but spends £260,000 on wages, stock, energy bills, and oat milk — you’ve got great turnover and no profit.

Profit is what’s left after expenses. It’s the money you actually get to keep. Turnover tells you how active your business is; profit tells you how efficient or sustainable it is. Both matter, but they measure very different things.

Possible Advantages of High Turnover

A healthy turnover can make your business look strong. It can help attract investors, get better terms from suppliers, or win over lenders who like to see cash coming in, even if profit’s still a work in progress. It also gives you a sense of scale — are you running a hobby or a business? Turnover can answer that.

It’s also a key figure for things like VAT registration. In the UK, if your annual turnover hits the threshold (currently £90,000), you must register for VAT. So knowing your turnover helps keep you on the right side of HMRC.

Possible Disadvantages (or Misunderstandings)

Focusing too much on turnover can be misleading. Businesses sometimes chase growth in sales without thinking about whether it’s actually making them money. You could double your turnover next year — but if you triple your costs, you’re worse off.

Turnover also doesn’t reflect cash flow. You might have sold £100,000 worth of services, but if clients haven’t paid you yet, that turnover figure doesn’t help you cover payroll. So while turnover is important, it’s just one part of the financial picture — not the whole story.

In Summary

Business turnover is the total income your business generates from sales before anything is taken away. It’s a useful figure for understanding your size and scope, and it matters for things like VAT and financial planning. But it’s not profit, and it doesn’t reflect how healthy your business is on its own. It’s a headline, not the whole article.