How to calculate sales growth rate
Sales growth rate is the most basic and most universal growth metric, applicable to any revenue line. It answers simply: are we selling more than before, and by how much.
The main pitfall is comparing unlike periods. Month-over-month growth can swing with seasonality, so year-over-year comparisons are often more meaningful for businesses with seasonal patterns.
- (Now - prior) / prior The formula
- YoY or MoM Compare like periods
- Watch seasonality The main pitfall
Short answer
Sales growth rate is the percentage change in sales between two periods. Subtract prior-period sales from current-period sales, divide by prior-period sales, then multiply by 100. If sales grew from 2,000,000 to 2,400,000 dollars, the growth rate is 20 percent. Compare like periods (year over year or month over month) to avoid seasonal distortion.
Step by step
Choose two comparable periods
Pick current and prior periods that are comparable, such as this year versus last year or this month versus last month.
Take sales for each
Use sales (revenue or bookings) for both periods on a consistent basis.
Compute the change
Subtract prior-period sales from current-period sales to get the absolute change.
Divide by the prior period
Sales growth rate equals the change divided by prior-period sales, times 100. Positive means growth, negative means decline.
Worked example
Last year you booked 5,000,000 dollars; this year, 6,500,000 dollars. Sales growth rate = (6,500,000 minus 5,000,000) divided by 5,000,000 = 1,500,000 / 5,000,000 = 30 percent year over year.
If you had instead compared December to November, a seasonally strong month to a weaker one, the month-over-month figure could look far higher or lower and mislead. Year-over-year comparison removes that seasonal distortion.
How Ardovo handles it
Ardovo computes sales growth year over year and period over period from live data, so seasonality is easy to control for. Rook decomposes growth into new and expansion so you see whether it is durable or dependent on one-time deals.
Frequently asked questions
What is the sales growth rate formula?
Current-period sales minus prior-period sales, divided by prior-period sales, times 100. Compare like periods, such as year over year, to avoid seasonal distortion in the result.
Should I use month-over-month or year-over-year growth?
Year-over-year is usually more meaningful for seasonal businesses because it compares equivalent periods. Month-over-month is useful for fast-moving trends but can swing with seasonality, so interpret it with that in mind.
What is a good sales growth rate?
It depends on scale and stage. Early companies may grow triple digits; larger ones grow more slowly. Judge growth beside efficiency metrics, since fast growth funded by unsustainable spending is not the same as healthy growth.