Your sales revenue is important to track because it shows how interested the public is in what you have to offer. It also confirms if your marketing efforts are paying off — and if you are keeping up with your competitors.
Sales revenue can be impacted by many factors, both internal and external. Internal factors may include marketing campaigns, quality salespeople and management practices. On the other hand, external factors may include economic circumstances, industry performance and competitor saturation.
So how do you improve your sales revenue? It may be easier said than done, but… you need to increase your sales!
With that as your goal, it is vital to put in place a long-term strategy instead of thinking short-term. A quick-fix sales increase is not sustainable — think Pokémon Go and Fidget Spinners. It never lasts!
Gross profit is the money a business makes from a sale once the cost of the product (‘Cost of Goods Sold’/COGS) is deducted.
This metric shows how much money your company makes per one dollar of revenue. To work out the margin left over after paying the COGS, subtract the cost of the goods sold from your total sales revenue, then divide that by your total sales revenue again.
For example, let’s say a business reports $5 million in total revenue for the year, and their COGS was $2 million. That business’s formula would look like this:
(5,000,000-2,000,000)/5,000,000=0.6 (or 60%).
This gross profit margin shows that this business has 60% of its revenue remaining from a sale after paying the costs of providing their product.
Net profit refers to the actual profit a business makes from a sale. It indicates the money left from a sale after COGS, all operating expenses and taxes are deducted. This is also referred to as the bottom line. Net profit is among the most important financial metrics for determining a business’s health.
It is widely accepted that businesses often do not make a profit in their first year or two. Following the initial start-up period, net profit can be a good predictor of long-term growth potential, especially when the data is compared with previous years.
Sales Growth Year-To-Date
Sales growth year-to-date shows how fast your company’s revenue is growing. It is also a way to compare one time period with another. For instance, one month with the previous month, or a particular month with the same month from the previous year.
Marketing Example: Monthly Website Traffic
How many people visit your website every month is a great indicator of how much spread your business has. If you notice a trend of increasing visitors month-to-month, that means more people are becoming aware of you. The more people are checking out your website, the better your chance of online sales or enquiries.