Sales growth is an important part of the business as it helps you to know whether your business continuously grows or goes stagnant. Monitoring the progress of your business helps you to know what already runs well and what needs to improve and it can be done by calculating the sales.
Learn about what sales growth is to know what you need to do if you got unexpected results from the calculation to make your business remains survive.
Definition of Sales Growth
Sales growth refers to the percentage of business growth in the net sales within a fiscal period to another. Net sales are defined as the whole sales income fewer returns, discounts, and allowance. It is common for business owners to compare the previous period producing lower sales to the recent one with higher sales.
Most likely, two periods are available in a corresponding length. For instance, people are unlikely to compare the net sales from a quarter of one fiscal year to the full year from another period. Alternatively, the comparison is made on two sequential fiscal years.
Types of Sales Growth
Companies might use different types of sales from one another. They will choose based on the business nature and industry. Here are several types that are commonly used by companies.
- Month on Month
This method calculates the growth value of each business month. By using the earlier month as a base, you can calculate the percent growth. It helps the company to decide the quick steps in shifting the strategies if something goes put off track.
- Quarterly Growth
The growth calculation happens once every three months. To know the year's growth, you can use the data obtained from the four quarters. It compares the results from the current quarter with the same quarter last year. Conducting this calculation provides you with a clear idea of how the full year will transform into.
- Half-yearly Growth
Numerous multinationals use half-yearly growth calculation to compare the sales from the previous to the recent years. The result showing achievement more than half target indicates that the business is still on the right track.
- Annual Growth
Annual growth calculation includes the comparison of previous year to newer year. To know the direction of the company, the comparison is made among multiple years. The results are beneficial to check if the growth keeps stick to the vision and mission which affect the financial stability of the company.
Good Growth in Sales
Good growth in sales is the condition where the growth sales can reach a certain percentage. The growth rate results are affected by the industry where the business runs and company size. Sales growth is considered good for large companies if it can reach between 5 to 10 percent.
Meanwhile, for mid-scaled and small-scaled companies achieving 10 percent on growth can put it under the good category. A good growth rate is such a goal that business owners and stakeholders need to turn out to be.
The good results can vary from year to year. You can consider the past performance, economic, and competitor achievements along with the sales results to bring your business into a major success.
How to Analyze It
To analyze the growth, you need to calculate the sales first. Begin by subtracting the net sales of the previous period from the recent period. Next, you need to divide the result with the net sales from the previous period. Multiply the result by 100 to obtain the percentage of the growth.
Analyzing the growth of the business through its sales can be beneficial for financial and budgeting. The result of growth analysis is a key metric for your business so that you need to monitor it regularly. The best way to monitor the metric is during an extended period.
It helps you to obtain clear insights into the growth trends and how to normalize the value. This is truly useful if you want to conduct monthly or quarterly methods for the revenue.
Growth Strategies for the Business
There are several top growth strategies that you can do to develop your business. Using these strategies helps you to boost sales growth as well.
- Market Penetration
Doing market penetration can increase market share for the previous products. It can be used to promote new products too. This process includes advertising, beautifying products, packaging, and discounts.
- Market Development
This refers to promote the previous products or services to the new customers. Otherwise, you can launch products in different locations.
- Product Expansion
Expansion can be a good option if you add new features to your products. Hence, it can interest more customers in the existing market.
- Market Segmentation
Dividing market into various segments based on the customers' preferences, location, or other factors allows you to make more effective targeted campaigns.
Equipping yourself about sales growth is important as you need to monitor the business’s progress. It helps you to choose the most suitable growth strategy to make your business bigger.