Tweet

Sales Analysis Techniques

Guest post by: Stan Prokop

Article Overview: The article provides insights into the value of business owners and managers analyzing sales and revenue numbers via a number of different techniques .

Sales Analysis Techniques

Every business owner or financial manager wants to know where the sales or revenues are at. Sales, which translate into cash flow, are the life blood of any business. In many cases, and certainly it's not a good thing, strong revenue or sales growth can mask or temporarily hide other issues such as material costs, rising interest rates, and , in general , overall solvency .

When we speak of 'sales 'more often than not we are comparing. We will often compare this month's sales to last month, or year over year, etc. It's intuitive for the owner to quickly establish a timeframe in his or her mind and compare those revenues to a previous period; month ago, year ago, etc.

Sales revenue needs to be studied by the business owner in the context of other aspects of the business. We will look at some ways to look at sales, from the viewpoint of ratios (we call them relationships) in an effort to help the business owner understand overall financial importance. Since we have previously referred to sales as the lifeblood of the company we can see that meaningful analysis of revenue should be a great additional to our toolkit of understanding our business!

The easiest and most basic way to view sales is from a growth viewpoint. The calculation is very simply: In terms of percent we simply take sales revenue this year, minus sales revenue last year, and divide by sales revenue last year - by multiplying that by 100 we get out sales growth number. This number is best charted in the context of a company hopefully achieving upward sales growth. When a business owner plots or charts this number over a longer period, i.e. a number of years the overall number becomes much more meaningful. And remember that even if sales growth is flat the company might be doing a bit more poorly when we take inflation into account.

Companies are in danger often of growing too fast. Therefore business owners might want to calculate how fast they in fact can growth based on their current financial position. How is this number calculated? „³ We take the net income of the company divided by last years retained earnings , and multiply that by 100 to get our percentage # as an answer . If the growth rate in sales (we calculated that previously) is faster than our affordable growth rate (we just calculated this) the firm might not be able to sustain this growth. That is of course because the company will need more assets, receivables, and inventory that need to be financed.

Let's look at one other final sales analysis technique - Break even. We calculate break even by taking our gross profit divided by total expenses, and multiply by 100 to provide a percentage. Business owners know that decreases in sales can sometimes mean a huge decline in profits, or visa versa. The break even calculation let's owners know how much cushion is available. If margins and expenses remain the same our calculation will show us what sales our required to break even. Owners who are very focused on profit can use this ratio often, as it will focus on sales growth to reach planned profits. Our calculation shows what sales we need to turn profits into positive territory.

In summary, sales fuel a company. Business owners can use various analytical techniques to determine how revenue numbers reflect the bottom line. It's all about those number relationships!

Related Articles
  Sales Training Techniques that Work!
  Risk Assessment & Analysis Techniques
  Financial Analysis: A Tool that Each Business Owner Needs to Use
  Sales Prospecting Techniques
  The Infinite Loop to Nowhere
  The Basics of Sales Management and Strategic Sales Planning
  Sales Training Courses that Bring Lead Generations to Life
  The Role of Creative Advertising Techniques
  A \"Closing Sript\" Is A Sales Myth
  Professional Search Engine Optimization (SEO)- Leads your Website to the Highest Peak
  Track Inventory in QuickBooks?
  TRADITIONAL SALES TRAINING LEADS TO DECLINE IN SALES
  Example of a Business Plan
  Cash Flow and Business Valuation
  Analysis of Twitter Buying Tweetie
  Beating The 80/20 Rule
  The Close
  Closing Sales Skills --- Improve Your Sales Techniques
  Is Your Sales Team Trusted?
  Sales Training - short term or long term success?

Article Tags: sales ratios



Related Forum Posts
Online Sales and Marketing vs Traditional - Hi Evan, I am noticing that many of the posts in the Sales/Marketing section deal with online marketing, SEM and and SEO and Affiliates. I was wondering if it might be a good idea to separate that section into two; 1) Online Sales and Marketing; 2) Traditional Sales and Marketing
Re: Online Sales and Marketing vs Traditional - [quote="ltrahan":31w9r2iz]Hi Evan, I am noticing that many of the posts in the Sales/Marketing section deal with online marketing, SEM and and SEO and Affiliates. I was wondering if it might be a good idea to separate that section into two; 1) Online Sales and Marketing; 2) Traditional Sales and Marketing[/quote:31w9r2iz] I second the request...
Re: Bad SEO techniques? - There are few more techniques which also known as the Bad SEO Techniques or Black Hat SEO Techniques. Such as: - Relying on keyword metatags - Purchase Links (From Spamming or blacklisted sites or doing purchase links on high level for site marketing) - Horde Page Rank: This is one of my favorites, because it's one that most webmasters don't understand yet. This is because it changed over the past year or two. The concept people have in their mind is that page rank is a key part of site rankings and linking to other sites "leaks page rank" from your site. However, the world has changed. - Swap Links: Another oldie, but not goodie. Search engines want links to represent endorsements. Swapped links represent barter, and they are trivial to detect. Don't swap links for the purpose of building page rank. It's a waste of your time - Implement duplicate content - Use Session IDs on your URLs - Use lots of Javascript - Implement your site in Flash
Re: Bad SEO techniques? - [quote="WebBizIdeas.com":1jr37kqx]There are few more techniques which also known as the Bad SEO Techniques or Black Hat SEO Techniques. Such as: - Relying on keyword metatags - Purchase Links (From Spamming or blacklisted sites or doing purchase links on high level for site marketing) - Horde Page Rank: This is one of my favorites, because it's one that most webmasters don't understand yet. This is because it changed over the past year or two. The concept people have in their mind is that page rank is a key part of site rankings and linking to other sites "leaks page rank" from your site. However, the world has changed. - Swap Links: Another oldie, but not goodie. Search engines want links to represent endorsements. Swapped links represent barter, and they are trivial to detect. Don't swap links for the purpose of building page rank. It's a waste of your time - Implement duplicate content - Use Session IDs on your URLs - Use lots of Javascript - Implement your site in Flash[/quote:1jr37kqx] Hi Jeff, Thanks for adding to the list. I have one question, though. How would one implement Session IDs for a URL, and what benefit would come from doing so?
Re: Reduce Bounce Rate - Website bounce rate matters most today. You can decrease by providing 1. Good Web Layout And Design 2. Relevant and unique content 3. Content clear and proper navigation 4. Improve website loading speed 5. Add relevant images 6. Analysis of keywords 7. Minimize pages 8. optimize your target keywords 9. Good quality of links 10. Take People Where They Want to Go


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

How to develop the best lateral thinking skills

What is an Adaptive Organization

SEO and the Entrepreneur

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.