Definition

Sales growth rate is a metric that highlights a company’s ability to earn revenue via sales over a given period. This rate is commonly used by companies to measure internal successes and failures. It is also used by investors to gauge a company's overall standing.

Example

Sales Growth Rate = (Current Period Sales — Prior Period Sales) / Prior Period Sales *100Suppose, a company reported sales of $750,000 in current period. The next year, it reports $1,000,000 in sales. Sales Growth Rate = (1,000,000 — 750,000) / 750,000 * 100 = 25%Thus, the company's sales growth rate is 25% during the period.

Why it matters

Sales growth rate is a critical business metric that allows companies to take informed decisions. A decreasing sales growth rate is an indication that the sales team may have to adopt a fresh approach to driving revenue growth. If it has a high sales growth rate then it is a good sign for stakeholders.

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