What is Sales Growth and Why Should You Care?
Sales growth measures how much a company's sales revenue has increased (or decreased) over a specific period. It's like the pulse of your business, telling you if you're moving in the right direction.
Why is it important?
- Performance Indicator: A positive sales growth usually signals that your business is on the right track
- Strategic Decisions: Understanding sales trends can help you pivot strategies
- Investor Appeal: Consistent sales growth makes your business more attractive to investors
How to Calculate Sales Growth
The formula to calculate sales growth is:
[\text{Sales Growth} = \left(\frac{\text{Current Period Sales}}{\text{Prior Period Sales}} - 1\right) \times 100]
Where:
- Sales Growth (%) is the percentage increase or decrease in sales
- Current Period Sales is the sales revenue for the current period
- Prior Period Sales is the sales revenue for the previous period
Calculation Example
Imagine you own a cozy bookstore. Last month, you made $60,000. This month, you made $66,000.
First, plug those numbers into the formula:
[\text{Sales Growth} = \left(\frac{66000}{60000} - 1\right) \times 100]
Calculate the fraction:
[\frac{66000}{60000} = \text{1.1}]
Subtract 1:
[\text{1.1} - 1 = 0.1]
Multiply by 100:
[0.1 \times 100 = \text{10}]
Your bookstore's sales growth is a 10% increase!
| Period | Sales |
|---|---|
| Prior Period Sales | $60,000 |
| Current Period Sales | $66,000 |
| Sales Growth Percentage | 10% |