How to Use the AVERAGE Function in Excel

The AVERAGE function helps you understand the typical value in a dataset by calculating the mean of a group of numbers. In this lesson, you’ll learn how the AVERAGE function works and see how it can be used to calculate the average revenue per service job, helping HVAC businesses understand their typical service ticket and overall performance.

Download the Excel file used in this tutorial:

Download

The AVERAGE Function in Excel

1. Choose the revenue values you want to average

  • Start with the column that contains your revenue data
  • This is the set of numbers Excel will use to calculate the average service ticket or average revenue per job

2. Use the AVERAGE function with the full column

  • Type the AVERAGE function in a blank cell
  • Select the entire revenue column as the input
  • Press Enter to return the average

This approach is useful when your dataset will continue growing over time.

3. Use the AVERAGE function with a specific range

  • Type the AVERAGE function again in another blank cell
  • Instead of selecting the whole column, highlight only the current range of revenue values
  • Press Enter to calculate the average for that fixed section of data

This gives you the average only for the rows currently included in that selected range.

4. Compare the difference between a column reference and a range reference

  • The version tied to the entire column updates when new data is added at the bottom
  • The version tied to a specific range stays fixed unless you manually expand it

In the video, a large new value is added below the dataset to show that:

  • The full-column average changes automatically
  • The fixed-range average does not change because it stops at the original last row

5. Use full-column averaging when your data is expanding

  • If you regularly add new rows to your dataset, mapping the AVERAGE function to the whole column is more flexible
  • This saves time because you do not need to keep updating the formula range

6. Avoid entering values one by one inside the function

  • The video also shows that you could manually enter separate values into the AVERAGE function
  • However, this is not efficient for real datasets
  • It is much better to highlight the column or the full numeric range instead

7. Use this as a starting point for more detailed average analysis

  • Once you understand the basic AVERAGE function, the next step is calculating averages by category
  • In the video, examples mentioned include averaging by:
    • System type
    • Job type
    • Technician
    • City
    • Month

That kind of analysis is typically handled with AVERAGEIFS, which is covered later.

8. Apply the method that matches your reporting need

  • Use a full column when the dataset is active and constantly growing
  • Use a fixed range when you want to analyze only a defined block of data
  • In both cases, the AVERAGE function gives you a fast way to understand typical revenue values in your Excel model

The AVERAGE Function in Excel

Q1. What does the AVERAGE function do in Excel?
 The AVERAGE function calculates the mean of a group of numbers by adding them together and dividing by the total count. It’s commonly used to understand typical values such as average revenue, average job cost, or average hours worked.

Q2. Why is the AVERAGE function useful for business analysis?
 Averages help reveal patterns that totals alone cannot show. For example, knowing the average service ticket value can help HVAC businesses understand pricing performance and identify opportunities to increase revenue per job.

Q3. What’s the difference between averaging a range and averaging an entire column?
 Averaging a specific range only includes the cells you select, while averaging an entire column automatically includes new data added later. Using the whole column can make your formulas dynamic and easier to maintain as datasets grow.

Q4. Can the AVERAGE function work with large datasets?
 Yes. The AVERAGE function works well with large datasets and is often used in operational analysis to evaluate performance across hundreds or thousands of records.

Q5. When should I use AVERAGE instead of other functions?
 Use AVERAGE when you want to understand the typical value of a dataset. If you need to calculate averages based on specific criteria, Excel also provides functions like AVERAGEIF and AVERAGEIFS.

Q6. What types of metrics are commonly calculated with the AVERAGE function?
 Businesses often use the AVERAGE function to measure metrics such as average order value, average service ticket, average revenue per job, average cost per item, or average completion time.

Get more lessons like this
by joining our newsletter

Receive weekly Excel tutorials, tips, and KPIs straight to your inbox

Join Now

Menu

Databoards

Analysis & Development

© 2025 All Rights Reserved.

Facebook Twitter Youtube