Here’s How Leading Business Companies Track Their Revenue Growth Rate

When measuring income development, it is time to move beyond Excel sheets if you are serious about developing your business. Understanding the present rate of revenue growth rate in India and the elements that contribute to it demands a firm grasp of the idea and its complexity.

Due to COVID-19 pandemic, worldwide retail sales will decrease by 2.9% in 2020 before rebounding in 2021 by 9.7% Understanding your position among these figures and studying the Revenue Growth Rate of leading companies becomes vital.

Below, we will examine the optimal approaches to consider for your company's revenue growth and the measures and tools you may employ to monitor and optimize it.

What is Revenue Growth Rate in Business?

Simply put, revenue growth is the increase in sales made by a firm over a specific time frame compared to the sales made over the same time frame in the past. For instance, the difference between your company's income this year and the previous year, where, in the assessment, expenses are not taken into account.

Revenue is distinct from both profits and sales and provides precise information about a firm's growth rate.

• Sales are merely the profit gained from selling services or items.

• Profit reflects sales income after expenditures have been deducted.

• Revenue includes all forms of revenue, like sales, investment returns, and royalties.

Why is revenue growth rate so crucial?

The revenue growth rate is essential since it indicates how much additional revenue a firm earns each month. When a corporation desires rapid growth, it will target a high percentage of revenue growth.

When seeking firms to collaborate with, investors often look for those with solid growth rates. Similarly, this indicator may inform several divisions within a corporation as to whether their efforts are effective.

While the significance of economic profit and revenue growth rate measurements is evident, Growth Jockey believes that balancing EP and revenue growth is essential. EP expansion at the expense of revenue growth is not profitable over the long run.

For instance, a firm that reduces its R&D expenditures to enhance its short-term profitability may end up decreasing its potential to provide innovative goods and services, therefore blocking new revenue streams. In our experience, businesses prioritizing long-term expansion and EP tend to generate more value.

Tools to Calculate Revenue Growth Rate

Understanding how to check revenue growth rate is crucial for every business. The revenue growth rate is expressed as a percentage increase from a specific base point. Revenue growth is calculated by subtracting the prior period's revenue from the current period's revenue and dividing the result by the prior period's revenue.

• Here's the equation:

(Current Period Income - Previous Period Income) / Previous Period Income

Let us imagine a company's sales rose from $820,000 in 2021 to $1,000,000 in 2022. Here is how to calculate their 2021-2022 sales growth:

($1,000,000 – $820,000) / $820,000

The result of dividing $80,000 by $820,000 is about 0.0975. This indicates that the revenue growth rate in business increased by 9.75% between 2021 and 2022.

The same technique may also be used to calculate monthly revenue rates. You may utilise it at any time as long as the durations are the same.

Obviously, this is simple mathematics, and it can be performed in an Excel worksheet if necessary.

However, analysing revenue growth is far more complex than completing a simple equation. To maintain or enhance a company's growth rate, you must account for other factors contributing to revenue growth across two time periods, such as new hiring, new sales techniques and increasing supply/demand. This is not a calculation that can be done using Excel.

Pertinent Metrics & KPIs for Startups

If you are adding a revenue growth track to your monitor, Growth Jockey recommends that you also analyse the following startup KPIs for context.

• Customer acquisition cost (CAC) is the money spent to convince a customer to acquire your products or services. This may be determined by dividing all expenditures associated with client acquisition (such as marketing, sales, and public relations) by the number of clients gained during a certain period.

• Client lifetime value (CLV) refers to the benefit derived from cultivating customer relations. Multiply your yearly revenue per client by the number of years you have had a connection with them, then remove your acquisition cost from the result.

• Burn rate refers to the rate at which a company spends money. You may compute its gross burn rate by deducting last month's expenditures from this month's expenditures, dividing the result by last month's expenditures, and multiplying the result by 100.

• Customer churn is the rate at which a company loses customers over a certain period. Calculate this measure by dividing the number of consumers lost over the previous period by the number of clients you had at the outset of that period, then multiplying the result by 100.

• Integrated marketing ROI: You compute this KPI to assess how much ROI your marketing activities are generating. Subtract the whole expense of your marketing investment from your sales increase, and then divide your outcomes by your marketing investment's total cost.

At GrowthJockey, we realize that a business may see higher growth in the first few months. However, it is too soon to predict its sustainable growth rate. Calculating just the revenue growth rate might be deceiving in measuring a company's actual performance. We assist in combining other measures for more accurate, granular findings.

Strategies for Increasing Growth Rate

GrowthJockey understands that most businesses seldom, if ever, see a revenue growth rate of companies comparable to the fictitious corporation in the previous example. It is typical for such rates to vary, but monitoring them regularly (and throughout many periods) is crucial if you want to identify revenue issues early on.

Growth rate standards vary by firm stage, but on average, companies' year-over-year growth falls between 15% and 45%. According to a Pacific Crest SaaS Survey those with less than $2 million in yearly sales often have substantially greater growth rates.

If your growth rate is not where you would like it to be, there are a number of solutions you may try that do not involve merely reducing costs. Strengthening your business's framework is a key first step towards accelerating your revenue growth rate.

1. Invest in your personnel

To make any changes to your firm, you need employee buy-in. In the end, they are the ones carrying out the vision. Consider the following factors when it involves investing in your workforce:

• Promote professional growth and career advancement

• Instead of overstretching your present personnel in response to a surge in demand, hire additional employees.

• Establish a culture of cooperation, transparency, and empathy to boost morale and decrease expensive employee turnover

• Reward meritorious performance to boost productivity

• Invest in management leadership training

2. Synchronise your income avenues with your objectives/goals.

To achieve objectives, you must establish them. This sort of strategic planning enables you to set particular objectives associated with your income stream, prioritise them, choose measurement measures, and then concentrate on what matters most.

Listed below are two KPIs that may help you refocus your strategy on your income channels:

• Product Range - If your business provides a range of goods and services, it might be time to examine the scope of your services and confirm that each income stream is optimal. Location may also affect this, particularly if you need to modify your marketing strategy for a certain group of customers.

• Sales Channels - We live in the era of an omnichannel sales strategy. For instance, the pandemic compelled the majority of businesses to strengthen their online sales channels or establish new ones. Those businesses that lacked the technical agility to make this transition suffered as a consequence.

We at GrowthJockey help you identify these and several other specific focus areas so you may divert your attention equally for uniform company growth.

3. Invest in Technology

Even the most effective revenue development strategy will be tough to execute without the proper technology. And one of the biggest obstacles to accomplishing this is the high expense of replacing the old systems used by so many enterprises.

Not only can old systems impede agility, but they also do not work well with upgrades or new technologies. This is particularly true for 21st-century organisations delivering new products and marketing models, such as B2B and SaaS enterprises, that are experimenting with novel techniques for monitoring, forecasting, and preparing for revenue development.

Digital technology may assist in fueling your growth track, but many businesses will need to examine their old systems thoroughly first.

Wrapping Up

There is no one secret formula for revenue increase, but there are principles that apply to the success of all businesses. Maximizing marketing and sales performance, communication with employees, and thorough revenue forecasting are a few things that can not only help you evaluate your revenue growth rate more accurately but will also assist you in boosting it.

At GrowthJockey, our unwavering dedication lies in creating customized models that effectively tackle the crucial challenges confronted by our clients across diverse industries. Regardless of the size of your company, whether a small-scale enterprise or a large corporation, you can now leverage cutting-edge technology to drive revenue growth.

Take the decisive step towards unlocking the next level of growth for your brand by contacting us today!