There has been a lot of confusion, as to what will make me say that the Business has been a successful venture. Is it the number of sales? Is it becoming a famous brand name? All may seem like metrics of a successful company to the general public.
But how do we know that a business is successful? So, here is the Sales Growth Formula that can describe the success of your business.
What is the Sales Growth Rate?
Sales growth rate estimates your company’s capacity to generate profits through sales over a selected timeframe like a year or a quarter or a month.
This rate is very useful for your company to understand all the relevant good works & issues. Also, it helps in providing a crude analysis to the investors, so that they can see if your venture is on the greens or if the company is starting to be showing flat lines.
What is the Sales Growth Formula?
To calculate the sales growth formula for your business, you’ll need to know the following values:
- Sales Value for the Previous Cycle
- Sales Value for the Current Cycle
- Remember, you can use either net or gross values. But, Net values are suggested to get a better analysis.
Once you have these values, you can use the below formula:
What is Good Sales Growth?
Good sales growth may vary for every company like the same number of sales will impact different companies in various ways. Depending on your company’s indicators, market size & the growth of your competition, the term “Good Sales Growth” can call for very different things.
But to say a thing if your business is going more than the Inflation Rate of your country, then definitely your numbers are very good.
Let’s see some of the other factors that can say about the sales growth:
Small Businesses have an opportunity to grow faster than Large Businesses. There are various reasons for this like larger corps sales plateau at a point & then focus on acquisitions. But also because smaller businesses are more impacted by the growth in sales.
For example, an MNC that rises from $10 million to $11 million in sales, will see a 10% sales growth rate. Meanwhile, a local company whose sales go from $300,000 to $600,000 sees a 100% sales growth rate. It’s all about perspective.
A booming sales growth rate can also be decided based on how well a company’s competitors are performing & the overall growth of its industry.
In 2019, U.S. eCommerce sales grew by 14.9% from the previous year & retail sales grew by 3.8%. Such figures are the indicator for the companies that sell products & services online likely saw higher individual sales growth rates.
Key Performance Indicators (KPI)
For Sales to happen, requires a prospect to go through the sales funnel to convert into a customer. There can be an instance when a company decides to change the qualified leads criteria for better service delivery & quality production.
This can lead to a decrease in the sales number & negatively affect the growth rate for that particular quarter. But, in the long run of the company such changes can be beneficial.
So this was about Sales Growth Formula which you need to know for running the venture. You can also understand Sustainable Growth Rate.
Hope you found the information that you were seeking.
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You can also look at some similar important articles on Sales Volume Variance, Lifetime value of Customers & Revenue Retention. Find more such interesting & useful Growth Hacking & Marketing blogs.