Enter the current period sales and the prior period sales into the calculator to determine the sales growth percentage.
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Sales Growth Formula
The following formula is used to calculate a sales growth rate.
SG% = (CP-PP)/PP * 100
- Where SG% is the sales growth percentage (%)
- CP is the current period sales ($)
- PP is the prior period sales ($)
Sales Growth Definition
What is sales growth? A sales growth is a measure of the rate of increase or decrease in sales displayed as a percentage of the total prior sales compared to the current sales. This sales growth rate is normally displayed as a percentage, but it can also be displayed as a simple absolute increase, which is calculated by subtracting the prior sales from the current sales.
How to calculate a sales growth?
- First, determine the prior period sales.
For this example, we are analyzing a shoe store. The sales from the previous month came out to be $75,000.00.
- Next, determine the current period sales.
During this current month, the shoe store is projected to net $85,000.00 in sales.
- Finally, calculate the sales growth.
Using the formula, we find the sales growth to be: ($85,000.00-$75,000.00)/($75,000)*100 = 13.33% increase in sales.
Is sales growth a profitability ratio? Typically, sales growth is measured and calculated with revenue instead of profit, so it would not be the same as a profitability ratio. The formula could easily be substituted for profit growth by replaces the sales with profit.
Is sales growth good? In most scenarios, sales growth is a good thing for a business. Some cases where this would not be good would be if the sales growth was accompanied by a decrease in profit, or if a sudden increase in sales would deplete your inventory and lead to a shortage of goods for future customers. That would lead to unhappy customers and potential losses in the future.
Why is sales growth important? Having positive sales growth is one key metric in business performance. This is because in most cases a sales growth is an indicator of profit growth, and profit, in the end, is the main objective of for-profit businesses.
What is organic sales growth? An organic sales growth is an increase in sales that occurs from the spread of positive word of your company or product through organic means. This means that the positive recommendations were brought on without spending any more on advertisements or for reviews.