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