A common question that many business owners have is, "How to calculate sales growth?" It's important to know how your business is doing so you can develop strategies to improve it. If you want to know how much money your company made last year and compare it with this year, there are a few different ways to figure it out. Let's explore them.
Sales growth is a term that gets thrown around a lot, but it can be difficult to calculate. This blog post will teach you how to calculate sales growth and why this metric is important for your business. We'll also provide some tips for your sales growth.
Before we discuss how to calculate sales growth, let’s understand what it is first. Sales growth for a business is the calculation you make to determine if your sales are growing at all.
What I mean by this is that, as early-stage businesses, we focus primarily on overall profitability from day 1 (or longer) until full cash flow begins.
We then work towards increasing our market share and productivity over time - not just how much revenue we're making but also how engaging with customers has improved and so forth.
When it comes to sales growth, we're trying to stay ahead of the competition and make sure that we can continue growing faster in order to compete effectively.
However, when you look at your business from a progress-based standpoint as opposed to an ROI/profit based one (as was covered above), then it's not hard for us to see our long-term sales growth is taking its toll on profitability.
This means if our company is ever acquired or wants to raise money to increase our sales we would need to replace the profit that most companies don't have nearly as invested in. So why is it important to know if your sales growth actually makes up for all of that investment?
Well, in certain circumstances (eg due diligence and exit planning) sales-growth numbers are considered a stronger metric to use rather than profits.
As opposed to focusing solely on the bottom line, there's now another layer of focus that could be taken into consideration first: how profitable would sponsorship or investor money make our business even after accounting for additional fees ?
This alternative solution to the exact same problem makes questioning our sales growth a no-brainer for early stage companies.
The only difference is that we can choose after careful consideration if sponsorship or investor money will be able to create both more profits and sales without losing any market share from past results.
That in itself might possibly change things other than just profit margins - as it would double down on revenue over time, which has been shown by impressive success stories like Facebook and Github.
In the past five years, a lot has changed in the way that people do business. Social media has been integrated into every aspect of our lives from how we communicate with friends and family to professional networking.
Now more than ever it seems, this social trend is being adopted by businesses ranging from small start-ups to multinational corporations. More companies are finding ways to integrate social media into their business model which allows them to better connect with their customers and potential clients.
This can be seen in everything from a local landscaping company using Facebook or Twitter to promote special deals on lawn care services, all the way up to big name brands like Ford Motors who use platforms such as Pinterest for product launches and promotional campaigns.
One area where many companies seem to be lagging, however, is in their efforts to grow sales. Too often businesses focus on marketing and branding initiatives without putting enough emphasis on what actually grows the top line – sales.
Even with all of the advancements in social media and online marketing, nothing can replace a good old fashioned sales strategy that focuses on growing your customer base and increasing revenue.
1) Sales Growth = Increased Revenue
The most obvious reason for wanting to grow sales is because it leads to increased revenue. When done correctly, a well-executed sales strategy will result in more customers buying from you which leads to more money in your bank account.
This is the simple equation that drives any business – more money coming in means a stronger business that can invest back into the company and develop new products/services.
2) Sales Growth = Increased Brand Awareness
In today's social media driven world, it is becoming increasingly important for companies to have a strong online presence. In order to create brand awareness, businesses need to market themselves not only their product or service but also as a company.
Social media provides an effective platform for doing this because it allows businesses to connect with potential customers all over the world and interact with them on their own terms.
By selling more of your products or services, you can increase your brand exposure which helps build trust between you and your customer base which leads to even higher sales down the line.
3) Sales Growth = Increased Market Share
When a company grows its sales, it is also growing its market share. This happens because as a business sells more of its product or service, it begins to take away market share from its competitors.
As the market share of a company increases, it becomes more difficult for competitors to steal customers away and can even lead to them shutting down their business. This is a positive trend for any company as it allows them to become the dominant player in their industry. As companies strive to enhance their market presence, understanding and mastering bank statements become crucial in managing finances efficiently. Precise financial documentation aids businesses in strategic planning, ensuring they remain competitive and achieve sustainable sales growth.
4) Sales Growth = Increased Employee Morale
One often overlooked benefit of growing sales is that it leads to increased employee morale. When a company is doing well and experiencing growth, employees feel appreciated and are more motivated to do their best work. This leads to a higher quality of work and makes jobs more enjoyable which can ultimately result in decreased turnover rates.
How to calculate sales growth? There are several different ways to calculate sales growth, such as:
1. One-year percentage growth- One way on How to calculate sales growth isto calculate the one-year percentage growth, simply subtract last year's sales from this year's sales and divide by last year's sales.
"In 2010 total sales were $31,000. In 2011 total sales were $39,000."
39,000 – 31,000 = 8,000; 8,000 ÷ 31,000 = 26%
2. Two-year percentage growth- To calculate two-year percentage growth subtract the previous year's sales from the current year's sales and then subtract that number from 100%. Then divide the result by the previous year's figure.
This is a common measure of overall corporate performance used in business so it should be straightforward to apply to your figures."In 2009 total sales were $31,000. In 2010 total sales were $39,000. In 2011 total sales were $39,000."
100% – (39,000 – 31,000) = 30%; 30% ÷ 31,000 = 0.97%
3. Compounded annual growth rate (CAGR)- The compounded annual growth rate takes into account not just this year's growth or decline but also the effect of that change on past totals. It is usually expressed as a percentage and calculated using the following equation:
((Ending Value / Starting Value) ^ (1 / number of years)) - 1
"In 2009 total sales were $31,000. In 2010 total sales were $39,000. In 2011 total sales were $39,000."
(($39,000 / 31,000) ^ (1 / 2)) - 1 = 19%
4. Rolling growth rate- To calculate a rolling growth rate for a number of years you need to subtract the previous year's figure from this year's and divide by last year's figure. The result is multiplied by 100%.
This gives an indication of how the business has done over the past few years but does not allow for longer trends or changes in direction."In 2010 total sales were $31,000. In 2011 total sales were $39,000."
(39,000 – 31,000) ÷ 31,000 = 26%; 26% x 100 = 260
5. Quarter-on-quarter growth rate- This measures the growth or decline between successive quarters. To calculate it, take the current quarter's sales and subtract last quarter's sales. Divide by last quarter's sales to get the percentage change."In Q1 2011 total sales were $10,000. In Q2 2011 total sales were $11,000."
(11,000 – 10,000) ÷ 10,000 = 10%; 10% x 100 = 100
6. Month-on-month growth rate- This is a variation of the quarter-on-quarter calculation and looks at successive months rather than quarters. It is calculated in exactly the same way."In March 2011 total sales were $10,000. In April 2011 total sales were $11,000."
(11,000 – 10,000) ÷ 10,000 = 10%; 10% x 100 = 100
Winning sales growth requires patience, planning and strategy. It can't be achieved overnight. This list of 10 tips will help you get started on the path to revenue growth.
1) Support Reps with Strategic Selling Tools- Sales reps are more productive when they have access to data that helps them make smart decisions about winning new customers.
Some of these tools include CRM systems for tracking accounts and opportunities , or analytics software used to measure performance against goals . Rather than paying a fortune on trade show booths, invest in technology that enhances selling efforts.
2) Foster Collaboration at All Levels- The best ideas come from everywhere within an organization, rather than just top level executives. Sales reps contribute valuable insight into areas such as customer needs or product benefits.
Their input should be encouraged . It's important that they feel valued and are recognized for their contributions, which could include sharing best practices or suggesting new ideas.
3) Promote Problem Solvers- When the competition increases, so does the pressure to win deals. Sales reps need to solve problems in creative ways if they want to stay ahead of competitors,
They should be rewarded by management for coming up with effective solutions. The more complicated a sale gets, the more valuable problem solvers become.
4) Implement Lean Methodologies- Sales organizations can quickly become bogged down with administrative tasks that take time away from selling activities.
By applying lean methodologies , you'll enable teams to operate faster by streamlining processes . You'll also enhance team morale by giving them more time to focus on winning deals.
5) Measure What Matters- A big mistake is focusing too much on what's easy to measure instead of key performance indicators (KPIs).
Sales reps can be effective with analytics tools that provide insight into lead management , pipeline management, customer profitability and other important areas . By creating customized dashboards or reports, they'll also be able to keep track of their progress.
6) Provide Feedback Regularly- One-on-one meetings are critical for coaching sales reps and sharing personalized feedback.
Don't just have these discussions at the beginning or the end of a deal . Make it a regular practice to go over a rep's strengths as well as areas for improvement. This will encourage them to improve and get better.
7) Offer Opportunities for Professional Development- Top performing reps will eventually want new challenges . Rather than stagnating in their current positions, they'll be open to pursuing new opportunities.
If you offer training opportunities and online courses , or support team members who wish to pursue executive education such as an MBA , it will demonstrate your commitment to professional development.
8) Ask Customers What Drives Their Decisions- Sales organizations can learn a lot from customers about what makes them tick.
There's no need to guess why customers buy specific products, instead of alternatives available in the market. Customers are usually happy to provide insight into what drives their purchase decisions, if asked in the right way at the right time.
9) Celebrate Wins- When a team achieves success, it's important to celebrate . This could be as simple as sending a congratulatory email or arranging a team lunch.
Sales reps need to feel appreciated for their hard work and accomplishments. A little recognition can go a long way in motivating them to do their best.
10) Encourage Risk-Taking- In order to achieve big goals, sales reps need to be willing to take risks . This could involve pitching new products or services to customers , or trying out new selling techniques.
Management should encourage risk-taking by establishing rules that minimize the consequences of failure. With the right environment, sales reps will be more likely to experiment and push boundaries.
