Sales growth is simple – it’s how we measure the increase of sales! In its basic form, we calculate it quite simply. Take the previous period’s sales revenue from the current sales revenue, divide that by the previous sales revenue and multiply by 100 to find your percentage. (Current sales revenue – Previous period sales revenue) ÷ Previous period sales revenue x 100.
It’s an absolutely essential part of figuring out the triumphs or pitfalls of your business.
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Why is sales growth important?
Sales growth is your predictor of how successful your business, or a particular product launch will be. You need to see how your sales are consistently growing in order to guarantee survival in an ever-changing and uncertain market. Therefore, being able to anticipate unknowns allows for sensible management of resources, well before any difficulties strike.
Sales growth tools can help CEOs evaluate targets on the basis of the historical record of the company. Consequently, they can predict and set margins for errors and corrections. Therefore, a CEO is better able to assess what policies are working and what needs amending in future.
Added to this, a sales team is able to use these tools to assess the performance of their team and are then better able to make judgements about the team’s performance. Then, they can make firm and pragmatic sales objectives within sensible parameters. High sales growth can also boost team morale, showing the departments or employees that have been most successful how they’re contributing to the prosperity. On the other hand, it can also show you where there are issues with your personnel.
Sales growth can also be an essential tool for investors looking to get a clearer picture of their potential returns and where their investment will be heading. As well, the decisions they might make about stock acquisition can be far more straightforward with a transparent forecast of the company’s growth.
Categories of sales growth metric
What’s crucial about sales growth is that you might not always get the results you want. It can be positive or negative. The reason for negative growth can be down to many elements, some well out of your control. These can be external factors like the volatility of the market, changes in competition and variations of government attitudes. However, negative growth can also be linked to things you do have control over such as team management issues, pricing or even the product itself.
Month on Month
Knowing that sales growth can be fairly complex, we have to further define our means of measurement. Month on Month (MoM) is a kind of metric that looks at the growth on a monthly basis. MoM metrics can be used to look at consecutive months of the same year, which is advantageous both in your first year of business and for achieving the targets of that particular year. It can also be used as a comparison for a particular month’s sales with previous years, which is especially useful for seasonally fluctuating business, like fashion retail. The benefit of this is that you’re able to look at ways that change can be implemented immediately, correcting mistakes early on before they get costly.
Here, growth is measured every three months, as the name suggests. It is done in a similar way to MoM, but the benefit here is that it’s spread out over a longer period. Use quarterly growth metrics to compare either the preceding quarter or the previous year’s same quarter.
When half-way through the year, you should aim to have achieved over 50% of your target. If there are problems and the growth is less, then a management team can adjust accordingly. Likewise, incentives can be directly related to half-yearly growth figures.
Finally, Annual sales growth metrics are used to get a bigger picture on the growth of the company. You can use these big picture growth charts to explore whether the company is staying on track with its larger objectives and strategies.
You can also make your comparisons more specific, rather than just your sales as a whole. For instance, you could look at the sales of a particular store or product. If you have limited customers you could make growth comparisons based on the activity of that customer. Also, you could make comparisons with your competitors to have a clearer picture of the direction of your company in contrast to others in a similar field.
What is a good sales growth percentage
The key thing to remember when you’re asking what percentage is ideal is that it differs for everyone! There is no rule that everybody in business follows about growth rates, you have to find the balance between what your business is capable of and what it aspires to achieve. Companies usually grow in the line with the economies of their respective countries, around 2-3%. Larger companies usually aim for between 5-10%. Smaller companies will go for something over 10% Anything much higher than that (20%+) is particularly exceptional, however a smaller company in its first years should certainly aim for this.
Another thing to bear in mind when comparing your rates of growth against another company’s is that growth is relative. A lot depends on a company’s consistency over time. Look at the bigger picture stretching various fiscal periods, to get a more balanced view.
Strategies to increase sales growth
Product and services: The first place to look is at the product or service quality you’re providing. Is it the best it can be? Is there demand? If not, consider a new product or begin researching different markets where demand may be higher.
Sales team: Is the problem among your personnel? Can you help provide extra resources or introduce incentives? Ensure a high level of communication with your Sales department to figure out the root of problems.
Visibility: Have a look at your social media accounts and your SEO. Are they showing a high level of user interaction? Are you regularly producing content for those and for your blog? Do enough people know about your brand?
Customers: What steps are you taking to retain customers? Could you introduce a small rewards programme? Do you have a regular newsletter with discounts or ‘insider’ information? What ways can you improve the customer experience and thus retention?
Automation: How can automation improve your lead conversion and generation rate? Although, be careful. Use metrics to ensure that it’s the right time to introduce automation.
Chatbots: An essential part of any modern business, utilising chatbots will improve your prospect generation rate and customer service. If your business is primarily in-store, think about ways chatbots can help you here!
Improve the customer experience!
Remember that sales is not the only growth metric to rely upon. In order to get a bigger picture on the successes and pitfalls of your business, research and perform tests based on revenues growth, earning per share (EPS) growth, return on equity (ROE) and sustainable growth rate. Rates of growth are proven to occur when a company invests in chatbots. When you introduce and integrate a chatbot to your customer experience sales generation is considerably improved.