Sales Growth Rate: Tips to Calculate Sales Growth Using Formula
What's the exact scenario of your business? Is your business booming or limping along?
Essentially, you want to tell whether it is growing or declining. One of the most basic ways to figure this out is by calculating the company's sales growth rate.
Though it may not seem like the most glamorous aspect of a job, it is nonetheless an essential part of understanding how your deals influence your company's productivity and future.
We have picturized everything you have to know about sales growth rate and tips to grow your revenue.
What is Sales Growth Rate?
Sales growth rate is the rate at which a business grows over a fixed period of time. For example, the annual growth rate of your business is the difference between your current revenue and the previous year's revenue. You experience a positive or negative sales growth rate depending on whether there's an increase or decrease in your current year's revenue compared to the previous year. It can be calculated in percentages or dollars.
The growth rate is not only reported and tracked internally by managers to help grow the company's annual revenue, but investors also pay close attention to this number.
The reason? To gauge if your business has the potential for long-term sustainable growth or might soon run out of steam. With this critical metric exposed, companies will know where they are at and how best to proceed when the time comes for improvement!
Sales Growth Rate Formula
You can calculate the sales growth rate of your business and find the efficiency by using a simple formula. All you need to have is the net income value of one period(initial period) and the net income value of another(current value).
You can get this number from an income statement or other business metrics. Once you have those two figures cited above, you can use the following sales growth calculation formula:
Sales growth rate = [(current period sales - prior period sales) / Prior period sales]*100
Let's understand this better with a practical example;
ABC SaaS company is a startup. They want to know their sales growth rate compared to last year's sales. As per their income report,
Sales revenue for the 1st quarter of 2021: $5.25 billion
Sales revenue for the 1st quarter of 2022: $6.34 billion
Now their sales growth rate will be = [(6.34-5.25) / 5.25]*100 = 20.76%
Thus ABC SaaS company had a growth rate of 20.76%, more than last year's sales.
What is an Average Sales Growth Rate?
If you are looking for a way to measure your company's sales performance, then you should consider using the average annual sales growth ratio. As it sounds, this figure indicates how much a company's global sales have grown annually.
From an analyst's perspective, this concept helps examine other ratios that indicate how well a company performs in various areas such as profitability, return on assets and debt management, capital structure, etc. You can find the average sales growth rate by using the formula,
Average annual sales growth rate =
(Sales growth rate A + Sales growth rate B + [Another period you want to measure])/ Total number of periods
Let's understand this with a practical example;
ABC SaaS company wants to measure their sales growth rate over the past three years. They have their Annual sales values and growth rate per year on their hands.
Year Revenue Growth rate
2018 $0.75 million -
2019 $1 million 25%
2020 $1.12 million 10.71%
2021 $1.5 million 25%
Now to calculate the average annual sales growth;
(25%+10.71%+25%) / 3 years = 20.23%
Thus, from 2018 to 2021, ABC SaaS company had a growth rate of 20.23%.
How to Calculate Your Sales Growth Rate?
Revenue is the king of all SaaS metrics in terms of growth. Revenue growth is the increase or decrease of a company's sales over time-based on the amount and frequency of sales made during that period.
You can calculate your sales growth rate simply in 3 steps. Let's do it;
Determine how many tickets for your service or product was sold or used during the initial time. This will denote what happened with your profits and net income during that period.
Determine your business value at the end of that period. That number will represent how well your business performed during that period. It can also be the present value.
If you have your initial and end values at your fingertips, you can apply those values to the sales growth rate formula to get your sales growth rate.
Tips to Improve Your Sales Growth
Now that you know how to track your sales growth. But how can you maximize your business's efficiency to reach a better growth rate?
Below are five ways in which you can improve your sales growth without having to alter your entire business model. Let's discuss possible ways of increasing it.
1. Understand your present sales scenario
The first step in any sales-related improvement plan is to look at existing practices. If you're not satisfied with your current sales growth rate, consider the “why” behind everything.
For example, is your team hitting their regular targets over the past few weeks? Are your overall sales figures high, but the net amount you'll see isn't quite matching up? If there have been times when things slowed down, try to identify the potential problems in your system and tailor strategies to meet your goals.
2. Optimize how your company generates revenue
To ensure your company is successfully pulling in revenue, you need to understand every layer of your organization. You need to know what it takes to bring in funds and how changes could benefit your company's earnings performance. But how can you do this? That's where the role of intelligent Revenue comes in.
Intelligent revenue looks at your data to determine the most crucial areas to focus on when it comes down to identifying what is fitting for your business. It helps you make changes that could lead you closer to succeeding with sales growth and ultimately fueling up your revenue positively.
So, if you pinpoint every layer of your organization, you can optimize your strategy to reach the expected growth rate.
3. Provide training to your sales team
Sales reps can become complacent and stale if they don't receive enough training. If your sales team doesn’t have enough input to play their game, you can’t scale your business.
Make sure you keep your team engaged in regular sessions that help with their sales or introduce them to new products. If you decide to change the sales process, ensure the sessions are relevant and up-to-date.
4. Make customer satisfaction your priority
Satisfied customers are essential to continued business growth. If you want to improve your sales performance, your customers must be happy with the products and services they're receiving or becoming aware of from being a part of your business.
In fact, 78% of consumers stay loyal to brands that understand their goals. Large markets flood buyers with thousands of offers every day. Today's buyers need more than just a product or service they can purchase. They need someone they can trust, who understands them and what they do – not just their consumer preferences.
5. Increase sales through practical product demonstrations
Presenting your product effectively can help increase the sales of your company. To do so, it's essential to have a compelling pitch that packs a punch and draws attention to your business.
When creating this pitch, list out what makes your product stand out from the crowd in an easily understandable manner. Also, make sure you discuss the benefits of looking into your products without selling them directly. One of the effective ways to establish this is having an interactive sales demo software in place.
In conclusion - aim for digestible skimmable content that touches on the best points about your product or service.
Close Deals faster and Increase Sales Growth - how?
Landing a B2B sales deal in today’s competitive market can sometimes be tricky. The key is to do your research before pitching and discover your customer’s goals and pain points.
Once you know the pain point of your users, it will be simple for you to address them with your product.
But how? That’s where the role of an interactive product demo comes in. It not only encourages your prospects to take action but also lets your sales team thrive with their efficiency.
During the qualifying process, you should have identified these needs that you can now show off during the demo as to effectively communicate how your software aims to meet them as well as benefit your client.
In addition to informing the customer that this concept of yours solves the problems they have been experiencing for so long, you also demonstrate that you have researched and understand their struggles.
Finally, a successful business will rely heavily on producing and selling new products to achieve a hipe on growth rate. You may have a great product that solves your prospects' problems.
But if you fail to present it in a way that stands out from all those other products competing for people's attention, you can’t convert leads to customers. Moreover, the sales will merely be stagnant.
Every business needs interactive software to enhance its sales because, ultimately, that drives revenue growth through repeated purchases, as customers are inspired by the experience they have with your product. It's not enough just to put together a collection of pages to describe the features of your product. You have to give a demo that is both simple and interactive.
But how can you achieve this? With the help of Storylane. We help you tailor your product demo that fits the expectation of your prospects and drives the session to a favorable destination. Want to explore how it helps your business? Book a free demo and present your product in a way that it deserves.
What is the formula for growth rate in sales?
You can calculate the sales growth rate using the formula: Current period sales - prior period sales / Prior period sales *100.
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