What is turnover in business and how can you increase it?

Many small business owners are strong at delivering the work, but spend less time looking at the numbers behind growth.

Turnover is one of those numbers. It shows how much income your business is generating from sales before costs are deducted.

Turnover isn't the same as profit. It's not the same as cash flow either.

A business can have rising turnover, but still feel short of money if costs are too high, customers pay late or extra sales create pressure on stock, staffing or delivery.

For small businesses, turnover is only one part of the financial picture. A higher sales figure can look positive, but it needs to be understood alongside costs, margins and cash flow.

This guide explains what turnover means, how to calculate it and how to increase turnover in a way that supports your business's health.

Quick answer: What is business turnover?

Business turnover is the total income your business generates from its normal trading activities over a set period, before costs are deducted. Basically, it's the value of what you sell.

You can increase turnover by:

• attracting more customers

• converting more enquiries into sales

• increasing the value of average order

• encouraging repeat purchases

• raising prices carefully

• adding new products, services or sales channels

But you should never look at turnover on its own. More sales aren't automatically better if they're low-margin, expensive to deliver or paid late.

Healthy growth comes from increasing the right sales, at the right margin, with payment terms your cash flow can handle.

Esther Kyesimira, finance workshop trainer, explains why turnover needs to be understood carefully:

"Turnover is the money you invoice to customers. It's an important number to know, but it doesn't mean you've been paid and it doesn't show what you've actually kept."

1. What does turnover mean in business?

Turnover is the income your business earns from selling the goods or services it normally provides.

• For a retailer, that might mean sales from products sold in a shop or online.

• For a consultant, it might mean project fees, retainers or advisory work.

• For a café, it might mean money taken from food and drink sales.

HMRC refers to the Companies Act definition of turnover, which describes it as the amount a business receives from providing goods or services as part of its ordinary activities, after deducting trade discounts, VAT and other relevant taxes.

In plain English, turnover usually includes money earned from your main business activity. It typically doesn't include:

• VAT you collect on behalf of HMRC

• trade discounts (when you reduce the normal sales price of a product or service)

• loans

• investment

• grants

• money from selling business assets

• interest received, unless this is part of your normal business activity

There can be grey areas, especially for businesses that act as agents, brokers or intermediaries.

If you're not sure what you should include in your turnover figure for tax, accounts, funding or reporting purposes, speak to an accountant.

Turnover is measured over a set period. You might look at:

• monthly turnover to understand short-term sales patterns

• quarterly turnover to check progress

• annual turnover when preparing accounts, applying for funding or reviewing your business's growth

Examples of turnover by business type

• If you're a retailer: Turnover is the value of the products you sell through your shop, website or other sales channels, not including VAT and relevant discounts.

• If you're a freelancer: Turnover is the value of the client work you sell. That might include project fees, day rates, retainers or one-off pieces of work.

• If you're a café: Turnover is the value of food, drink and other items you sell to customers.

• If you're a consultant: Turnover is the value of the advice, project work, training or retained support you sell.

• If you're an e-commerce business: Turnover is the value of your online sales, adjusted for VAT, discounts, refunds or other relevant allowances where necessary.

2. How do you calculate business turnover?

A simple way to think about turnover is:

Sales from normal business activity - VAT - trade discounts - refunds or allowances where relevant = turnover

For example, a business sells £60,000 of products in a year. It gives £2,000 in discounts. It charges £9,600 in VAT. Its turnover is £48,400.

That's a basic example, but it shows the principle.

Turnover is about the value of sales your normal business activity has generated, not the total amount of cash that passes through your bank account.

The exact treatment will depend on your accounting method, how your business is structured and what you're using the figure for.

The turnover figure you need for annual accounts may not always be identical to the figure you're checking for VAT or funding purposes. If you're not sure, ask your accountant before relying on the number.

Annual turnover

Annual turnover is turnover over a 12-month period.

For many businesses, this will be the financial year used for accounts. For others, it might be the tax year or a rolling 12-month period.

Annual turnover is useful because it gives you a broad view of your business's size and growth. But it can hide short-term problems.

A business might have a strong annual turnover figure while still having weak months, seasonal dips or periods where cash is tight.

Monthly turnover

Monthly turnover shows how much the business sells in a particular month.

This can be useful for spotting patterns. For example, you might see that sales rise before Christmas, dip in August or increase after a particular marketing campaign.

Monthly turnover can also help you react sooner. If you only look at turnover once a year, you may miss warning signs until they've already affected cash flow, profit or stock levels.

3. Turnover vs profit vs cash flow

Turnover, profit and cash flow are related, but aren't the same thing.

• Turnover is the value of sales from your normal business activity before you've deducted costs.

• Gross profit is turnover minus the direct costs of producing or delivering what you sell. For example, that might include stock, materials, packaging or subcontractor costs.

• Net profit is what remains after deducting direct costs and overheads. Overheads might include rent, software, insurance, wages, marketing and utility bills.

• Cash flow is how your money moves in and out of the business. It's about timing as much as totals.

Here is a simple example. A business has turnover of £100,000. It spends £45,000 on stock, materials, packaging and delivery. Its gross profit is £55,000.

It then spends £35,000 on rent, wages, software, marketing, insurance and other overheads. Its net profit is £20,000.

On paper, that business is profitable. But it could still run into cash flow problems if customers take too long to pay, it has to buy stock months in advance or tax bills arrive before enough cash has built up in the bank.

That's why you should review turnover alongside profit margins and cash flow forecasts, not on its own.

As Esther Kyesimira puts it in this webinar:

"Profit shows whether the business works on paper. Cash flow shows whether the business survives in real life."

Want more information?

Read Enterprise Nation's guides to cash flow management and how to create a cash flow forecast for your small business.

4. Why turnover is important

Turnover is useful because it gives you a clear starting point for understanding how much your business is selling.

It can help you measure growth, plan ahead and spot when your sales activity isn't producing enough income.

It's also used in practical situations such as accounts, funding applications, insurance forms and tax checks.

Turnover is also one of the ways the government tracks the economic contribution that smaller firms make. The government's 2026 SME plan says SMEs, including people who are self-employed, generate over £2.8 trillion in turnover.

Understanding growth

Turnover can show whether sales are rising, flat or falling.

• If turnover is increasing, your business may be attracting more customers, selling more often, charging higher prices or increasing the value of each sale.

• If turnover is falling, it may suggest demand is weakening, customers are buying less often, conversion is dropping or a sales channel isn't performing as well as before.

But rising turnover shouldn't be celebrated on its own. GOV.UK's business growth guidance makes the point that while many businesses think of growth in terms of higher sales, maintaining or improving profitability is equally crucial.

That's a useful warning for small businesses. A higher turnover figure is only helpful if the work is profitable, deliverable and paid for in a way the business can manage.

Registering for VAT

Turnover can affect whether you need to register for VAT.

At the time of writing, GOV.UK says you must register for VAT if your total VAT taxable turnover is more than £90,000, or you expect it to go over that threshold.

This matters because VAT can affect your pricing, admin and cash flow.

You may need to charge VAT, submit VAT returns and keep VAT records. If your customers are consumers or businesses that can't reclaim VAT, it may also affect how they see your prices.

If your turnover is getting close to the VAT threshold, don't leave it until the last minute. Check GOV.UK for the latest VAT rules and speak to an accountant so you understand what needs to happen and when.

Accounts, funding and planning

Turnover may also be used when you:

• prepare annual accounts

• apply for a business loan or grants

• fill in insurance forms

• speak to investors

• discuss your business's value

• apply to become a supplier

• review whether you can afford staff, premises or new equipment

Knowing your turnover helps you answer these questions more confidently. It also helps you see whether the business is growing in a way that supports your wider goals.

5. Before trying to increase turnover, check these numbers

Before you try to increase turnover, you need to know what's holding it back. And the answer isn't always more marketing.

You may already have enough enquiries, but not enough of them are turning into sales. You may be selling often, but at too low a price. You may be winning large orders, but struggling because payment terms are too long.

Start by checking:

• current monthly turnover

• annual turnover

• gross margin

• net profit margin

• average order value

• conversion rate

• repeat purchase rate

• debtor days

• stock levels

• refunds or returns

• capacity to deliver more work

• marketing cost per enquiry or sale

This gives you a clearer view of where to act. For example, if you get plenty of enquiries but few customers, focus on conversion. If customers buy once and don't return, focus on repeat purchases.

If you're busy but not making enough money, look at pricing, margin and the type of work you're taking on.

Enterprise Nation adviser Esther Kyesimira recommends keeping the focus on a small set of useful numbers:

"You don't need to know every number in your business, but you do need to know turnover, profit, cash flow, tax set aside and payment terms."

6. The main ways to increase business turnover

You can usually increase turnover by doing one or more of the following:

1. Reaching more customers

2. Converting more enquiries into sales

3. Increasing your average order value

4. Encouraging repeat purchases

5. Reviewing pricing

6. Adding new products, services or sales channels

We explain each in more detail below.

A useful way to look at growth in turnover is to break it into four drivers:

1. How many people hear about your business

2. How many buy from you

3. How often they buy

4. How much they spend

Even small improvements in each area can have a noticeable effect.

For example, you could increase turnover by getting slightly more enquiries, converting a few more of those enquiries, encouraging customers to buy more often and increasing the average value of each sale.

That approach is often more realistic than looking for one large jump in sales.

Method 1: Reach more of the right customers

To increase turnover, you may need more people to find out about your business. But it needs to be more of the right people.

That means people who understand what you sell, need what you offer, are likely to buy and can be served profitably.

Here are some ways to reach more of the right customers:

• Improving your visibility in local search

• Updating website pages so products and services are clear

• Using social media to show proof, examples and customer results

• Building partnerships and referral relationships

• Attending events where likely buyers spend time

• Using email marketing (where you have people's permission to contact them)

• Testing paid advertising carefully

• Pitching to stockists, buyers or larger clients where relevant

Be careful not to chase every possible customer. If a new type of customer expects lower prices, longer payment terms or more support than you can afford to provide, higher sales may not lead to a healthier business.

Track where enquiries come from and whether they turn into profitable work. That will help you avoid spending time and money on marketing that creates interest but doesn't bring about useful sales.

Vic Taylor, founder of Touchpoints Marketing, suggests reviewing customers by both profit and fit:

"Look at your current customers and score them for enjoyability and profitability. The customers who score highly on both are the ones you should try to attract more of."

This is a useful exercise because turnover growth is healthier when it comes from customers who value the work, pay properly and are a good fit for how your business operates.

Method 2: Convert more enquiries into sales

Many businesses don't need more leads straight away. They need to do more with the enquiries they already receive.

Conversion is about turning interest into paid work. That might mean helping someone feel confident enough to book, making it easier to buy or following up when someone has gone quiet.

You can improve conversion by:

• responding quickly to enquiries

• making next steps clear

• following up quotes

• explaining prices clearly

• using reviews, case studies and testimonials

• making checkout or booking easier

• offering simple payment options

• answering common questions before they become doubts

• training staff to handle common sales questions

Communication matters here. If someone asks for a quote and hears nothing for a week, they may go elsewhere.

If your website explains what you do but not how to buy, people may leave before making contact. If your proposal is vague, a customer may delay because they're not sure what happens next.

A simple follow-up process can make a difference. For example, you might follow up new enquiries within 24 hours, send a reminder three days after issuing a quote and check in again after a week with a useful answer to a common question.

You're not trying to pressure people. Your aim is to make buying from you easier, clearer and more reassuring.

Method 3: Increase your average order value

Average order value is the typical amount a customer spends in one transaction.

Increasing this figure can raise turnover without you having to find a large number of new customers. You might do this through:

• bundles

• service packages

• pricing tiers

• relevant add-ons

• cross-sells

• upgrades

• minimum order values

• thresholds for free or cheaper delivery

If you're a product business, you might sell a starter bundle rather than a single item. If you're a consultant, you might offer a half-day review alongside a written action plan. A web designer might offer maintenance support after a website launch.

This only works when the extra offer genuinely helps the customer. Poorly matched add-ons can damage trust and make the sale feel harder than it needs to be.

Look for useful combinations. What do customers often buy together? What do they need after the first purchase? What would help them get a better result from the product or service they're already buying?

Method 4: Encourage repeat purchases

Selling again to people who already know and trust your business can be a practical way to increase turnover.

This means finding useful reasons to stay in touch with customers and making it easy for them to buy again when the timing is right.

You could use:

• email reminders

• renewal prompts

• subscription options

• retainers

• loyalty offers

• seasonal offers

• aftercare

• personalised recommendations

• check-ins with previous customers

If you're a florist, you could prompt seasonal orders around birthdays, anniversaries and events. If you're a consultant, you could offer quarterly reviews.

A food brand can build bundles for repeat online orders. A retailer can remind customers when popular products are back in stock.

Repeat purchases work best when they're based on what the customer actually needs. Use your customer records to understand buying patterns, then contact people with a relevant reason.

Method 5: Review pricing

Pricing is one of the most direct ways to increase turnover, but you must do it with care.

If your costs have risen but your prices have stayed the same, your turnover may look stable while profit quietly falls.

If you regularly offer discounts to win work, you may be increasing sales while weakening your margin.

Esther Kyesimira warns that more sales aren't always the answer:

"Revenue improves fastest when you focus on pricing and boundaries, not just more work. Before you look for more sales, look at the sales you already have and whether you're pricing them properly."

That might mean charging for extra advice, reviewing unpaid time, stopping scope creep or increasing prices where your costs have risen.

You should review your prices at least once a year. Look at:

• whether suppliers' costs have increased

• whether delivery, packaging or staffing costs have changed

• how much time the work actually takes

• what customers value most

• whether some offers are underpriced

• whether you're using discounts too often

• how prices compare with the value you provide

Don't base pricing only on what competitors charge. Competitors' prices can be useful context, but they tell you nothing about your costs, your level of service or your customer relationships.

Putting prices up can increase turnover without increasing workload, but only if your customers still see the value.

You might test higher prices with new customers, introduce new packages or raise prices on specific products or services first.

When increasing prices for existing customers, explain the change clearly and give reasonable notice whenever you can.

Then track the effect. If conversion stays healthy and margins improve, the price rise may be working.

If enquiries fall sharply, you may need to review how you explain the value or whether the offer is right for that customer group.

Method 6: Add new products, services or sales channels

Another way to increase turnover is to add new things to sell or new ways to sell them. This might include:

• new offers for existing customers

• digital products

• workshops or events

• subscriptions

• corporate packages

• licensing

• service retainers

• online sales

This can work well when the new offer builds on something the business already does well.

For example, a consultant could turn common client questions into a paid workshop. A maker could create a smaller entry-level product. A retailer could add an online shop alongside physical sales.

For service businesses, Vic Taylor recommends making your services easier for customers to understand:

"Productising your services helps customers understand what they're buying. Instead of charging by the day or by the hour, turn your service into clear packages with clear outcomes."

This can help customers make a decision faster and can make pricing easier to explain. It also helps you move away from selling only time and towards selling a clear result.

Before adding a channel

Check the numbers and ask:

• What will it cost to set up?

• What fees or commission will apply?

• How quickly will I be paid?

• Will I need extra stock?

• Can I deliver without hurting existing customers?

• What margin will be left after covering all costs?

Yes, a new channel should increase turnover, but it should also support the wider business.

VIDEO: Want to scale to £100k turnover?

Discover how to confidently grow your business to over £100k turnover – without burning out!

7. Using customer data to increase turnover

The more you understand your customers, the easier it is to spot practical ways to increase turnover.

A simple customer relationship management (CRM) tool, accounting software or well-kept spreadsheet can help, as long as it's accurate and you use it consistently.

Track information such as:

• what customers bought

• when they last bought

• how much they spent

• where the enquiry came from

• whether they bought again

• what they asked about but didn't buy

• whether they gave permission for marketing

• customers' preferences

With this information in hand, you'll make better decisions.

Vic Taylor also recommends looking closely at which activity is actually creating revenue:

"Look at what's already working in your business. Which marketing activities are bringing in revenue, and which ones are using time, money and energy without giving you enough back?"

If past customers haven't bought for six months, you can send them a relevant reminder or update.

If one product creates lots of enquiries but few sales, you can check whether the price, description or buying process is confusing people.

If one marketing channel creates plenty of traffic but few paying customers, you can stop spending so much time on it.

Customer data can also help you see which customers are most valuable to the business. And that isn't always the customers who spend the most.

A customer who pays on time, buys regularly and needs little extra support may be more profitable than a larger customer who negotiates hard, delays payment and takes up a lot of time.

Use customer data responsibly. Only contact people where you have the right permission or legal grounds to do so.

Make it easy for people to opt out of your communications and keep your records accurate.

8. Improving communication with customers

Good communication can increase turnover because it helps people understand what you offer, why it's relevant and what they need to do next.

Start by asking how customers prefer to hear from you. Some may respond well to email. Others may prefer phone calls, text messages or direct messages.

The right channel will depend on your business, your audience and the nature of the purchase.

Your messages should be relevant, clear and timed well. Here are some examples:

• A quote follow-up after three days

• A reminder before a subscription ends

• A useful guide after an enquiry

• A thank-you email with next steps

• A prompt to reorder after a typical period of use

• An update when a popular product is back in stock

• A short check-in after a project has finished

Avoid contacting people for the sake of it. Too many messages can push customers away, so focus on moments where you can be genuinely useful.

You can also test what works. Try different subject lines, offers, timings or calls to action (CTAs). Then track which messages lead to replies, bookings or sales.

9. How to increase turnover without damaging cash flow

More turnover can create more cash pressure if the timing is wrong.

A large order might look like good news, but it can cause problems if you need to pay for stock, materials, staff or delivery long before the customer pays you.

A fast-growing business can run out of cash because it has money tied up in invoices, stock or upfront costs.

To increase turnover without damaging cash flow, consider:

• asking for deposits

• using staged payments

• invoicing promptly

• making payment easy

• avoiding long payment terms where possible

• credit-checking larger customers

• checking upfront costs before taking large orders

• reviewing stock and delivery costs

• avoiding discounts just to win work

• forecasting the cash impact of growth

This is where a cash flow forecast becomes useful. It can show whether the business will have enough money to cover costs while waiting for customer payments.

Read Enterprise Nation's guide on how to create a cash flow forecast for your small business if you need a simple way to plan ahead.

You can also read the guide on how to improve cash flow quickly for practical steps such as chasing overdue invoices, reviewing payment terms, asking for deposits and making invoices easier to pay.

10. When increasing turnover may not be the right priority

Sometimes the healthier move isn't to increase turnover immediately, but to improve margins, payment terms, pricing or operations first.

Increasing turnover may not be the right immediate priority if:

• margins are too low

• delivery capacity is already stretched

• customers are paying late

• the business relies too heavily on one customer

• stock is tying up too much cash

• you (the owner) are working more hours without more profit

• sales are growing, but you're getting more complaints or giving more refunds

For example, if you're already fully booked but profit is weak, the answer may be to raise prices, reduce low-value work or improve processes.

If sales are rising but cash is tight every month, the issue may be payment terms, invoicing or stock management.

If one large customer makes up most of your turnover, more work from that customer may increase risk rather than reduce it.

Growing turnover should make the business stronger. If it creates more pressure without improving profit or cash flow, pause and look at the numbers.

Esther Kyesimira makes the point clearly:

"The first answer isn't always to find more sales. Sometimes the better answer is to increase your prices, charge properly for your time and focus on the work that gives you the best return."

A simple action plan for growing your turnover

Don't try to change everything at once. Start with a small number of actions and measure the effect.

This week

• Work out your current monthly and annual turnover.

• Identify your top-selling products or services.

• Check which offers have the strongest margin.

• List unpaid invoices and late payments.

• Follow up open quotes and enquiries.

• Review your prices against current costs.

This month

• Improve one sales page or product page.

• Contact previous customers with a relevant reason to buy again.

• Test one bundle, package or add-on.

• Ask satisfied customers for reviews or referrals.

• Review your payment terms.

• Track conversion rate and average order value.

This quarter

• Review your mix of products or services.

• Stop, improve or reprice low-margin offers.

• Test one new sales channel.

• Build a simple sales forecast.

• Update your cash flow forecast.

• Speak to an accountant or adviser if turnover is rising but cash is tight.

Turnover FAQs

What is turnover in simple terms?

Turnover is the income your business earns from selling its normal goods or services over a set period. It's the value of what you sell before business costs are deducted.

Is turnover the same as profit?

No. Turnover is sales income before costs. Profit is what remains after costs have been deducted.

A business can have high turnover and low profit if its costs are too high, its prices are too low or the work is expensive to deliver.

Is turnover the same as revenue?

In everyday business, turnover and revenue are often used in a similar way. Turnover usually refers to income from ordinary trading activity, such as selling goods or services.

Does turnover include VAT?

For formal accounting purposes, turnover is generally shown after deducting VAT, trade discounts and other relevant taxes, based on the Companies Act definition that HMRC uses.

If you're checking turnover for VAT, accounts, funding or another specific purpose, speak to an accountant if you're not sure what to include.

How do I calculate annual turnover?

Add up the income your business has earned from its normal sales activity over the year. Then deduct VAT, trade discounts and relevant adjustments such as refunds or allowances (where these apply).

Your accounting software or accountant should be able to help you find the right figure.

What is a good turnover for a small business?

There's no single good turnover for a small business. It depends on your sector, costs, profit margin, income (as owner), staffing, capacity for doing work and growth plans.

A business with lower turnover but strong margins and reliable payment may be healthier than a business with higher turnover, weak profit and constant cash pressure.

Can a business have high turnover and low profit?

Yes. This can happen when costs are high, prices are too low, discounts are too heavy or the work takes too much time to deliver.

That's why you should review turnover alongside gross margin, net profit and cash flow – not in isolation.

Can increasing turnover cause cash flow problems?

Yes. More sales can create cash pressure if the business has to pay for stock, materials, staff, delivery or tax before customers pay.

This is common when customers have long payment terms or when a business needs to buy stock upfront.

When do I need to register for VAT?

At the time of writing, GOV.UK says you must register for VAT if your total VAT taxable turnover is more than £90,000, or you expect it to go over that threshold.

VAT rules and thresholds can change, so check GOV.UK and speak to an accountant if your turnover is approaching the threshold.

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