What is variance analysis?
Variance analysis is explaining the gap between budgeted or forecast results and actual results, and what caused it. A variance is favorable when results beat the plan and unfavorable when they fall short. Good variance analysis separates causes such as price, volume and mix, so the team knows whether it sold less, sold cheaper or sold a different kind of work.
Why it matters to a revenue leader
When revenue misses, the board wants to know why, and the answer shapes what happens next. A volume miss points to pipeline or capacity. A price miss points to discounting. A mix miss means the team sold more low-margin work than planned. A revenue leader who can split a variance this way speaks the CFO's language and earns credibility with the board.
How to calculate it
Variance = actual minus budget (or forecast). Percent variance = variance divided by budget. A common mistake is reporting only the total variance, which hides offsetting price and volume effects.
Example
Fictitious numbersA fire protection company budgets 200 inspections at $1,500 each, or $300,000, for the month. It completes 220 inspections at $1,350, or $297,000. Revenue misses by $3,000, but volume was $30,000 favorable and price was $33,000 unfavorable.
"Was last month's revenue variance driven by volume, price or mix, and do we know which?"
Sources
- Variance Analysis (Corporate Finance Institute) checked 9 Oct 2026