# What is Net Revenue?

What is Net Revenue? Gross sales minus returns, cancellations, and discounts. Net Revenue = Gross Revenue - Returns - Cancellations - Discounts.

## How it works in practice

Net revenue is 'the truth.' Gross revenue looks great in a report — but with 20% returns, 5% cancellations, and 10% discounts, net revenue is just 65% of gross. Every business decision should be based on net, not gross.

## Related metrics

- Gross Revenue — before deductions
- Return Rate — drives net revenue down
- Discount Strategy — discounts lower net revenue
- Gross Margin — calculated from net revenue

## Common misconception

'$300K in sales — we hit our goal!' Not if 25% is returns. Net revenue is $225K. Always define what counts as success — gross revenue is a poor retail KPI on its own.

## How to fix it

Net revenue much lower than gross? (1) Analyze the return rate — above 15% signals a product/description issue, (2) analyze the cancellation rate — above 3% signals a delivery-time issue, (3) analyze discount depth — average discounts above 20% signal a pricing-strategy problem.

## Real-world example

A fashion store: gross $120K, net $83K (69%). Analysis: returns 18%, discounts 13%. Fixing size guides cut returns to 11%. Ending blanket discounts raised the net/gross ratio to 81%.

## Where to start

Set net revenue as your primary KPI, not gross. Check the net/gross ratio monthly. Below 75% is a red flag. Above 85% is healthy. A dashboard showing gross alone is misleading.

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Category: Finance · From the [Jimmy OS KPI Glossary](https://jimmy-os.com/glossary/kpi.md) · Source page: https://jimmy-os.com/glossary/kpi/net-revenue