What is Revenue Growth? How to Calculate and Improve it

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If you’re serious about growing your business, it’s time to move on from Excel spreadsheets for tracking revenue growth. Understanding your current revenue growth rate and the factors that contribute to it necessitates gaining a firm grasp on the concept and its complexities. 

We’ll go over the best ways to think about your company’s revenue growth, as well as the metrics and tools you can use to monitor and improve it, in the sections below. 

What Exactly is Revenue Growth? 

Simply put, revenue growth is the increase in a company’s income over a given time when compared to the same time in the previous year. For instance, the amount of money your company made this year versus last year. Expenses are not considered for this calculation. 

Revenue differs from sales and earnings in that it provides us with different information about a company’s growth rate:

  • Only the money made from selling services or products is referred to as sales 
  • Earnings represent sales revenue after expenses are deducted 
  • Revenue includes all types of income, such as sales, investments, and royalties 

How is Revenue Growth Determined? 

Revenue growth is expressed as a percentage increase from a given starting point. To calculate revenue growth, subtract the previous period’s revenue from the current period’s revenue and divide the result by the previous period’s revenue. 

Here is how it works: 

(Current Period Revenue – Previous Period Revenue) / Previous Period Revenue 

Assume a business earned $820,000 in 2020 and increased its revenue to $1 million in 2021. Here is how to calculate their revenue growth between 2020 and 2021: 

($1,000,000 – $820,000) / $820,000 

Now we divide $80,000 by $820,000 to get a value of 0.0975. That means the company’s revenue increased by 9.75% between 2020 and 2021. 

The same formula can be used to calculate monthly revenue rates. It can be applied at any time if the lengths are the same. 

Of course, this is simple math that can be done in an Excel spreadsheet if necessary. However, evaluating revenue growth is far more difficult than solving a single simple equation. To maintain or improve a company’s growth rate, you must account for other factors that contributed to revenue growth between two time periods, such as new hires, recent sales strategies, increased supply/demand, and so on. 

That is not something an Excel spreadsheet can assist you with. 

Strategies for Accelerating Growth 

Let’s face it: most businesses rarely, if ever, experience growth rates comparable to the fictional company described above. It’s normal for these rates to fluctuate but keeping track of them consistently (and over different time periods) is critical if you want to spot revenue issues early. 

If your growth rate isn’t where you’d like it to be, there are several solutions you can try that don’t involve cutting corners. A critical first step toward increasing your revenue growth rate is to strengthen your company’s foundation. 

Invest in Your Employees:

Employees’ buy-in is required before making any changes to your business. They are the ones carrying out the vision. When it comes to investing in your employees, here are a few things to think about: 

  • Encourage professional development and advancement. 
  • Instead of overworking your current workforce, hire new employees when demand increases. 
  • Create a collaborative, open, and empathic culture to boost morale and reduce costly turnover. 
  • Encourage productivity by rewarding decent work 
  • Managers should be given leadership training 

Align Your Revenue Streams with Your Goals/Targets 

You must set goals to achieve them. This type of strategic planning enables you to identify specific revenue-related goals, prioritize them, choose measurement metrics, and then focus on what is most important. 

Here are a few metrics that can help you realign your approach to revenue channels: 

  • Geography – Growth in different geographic segments is unavoidable for national and global corporations. Monitoring your company’s success in various locations can help you make strategic decisions about staffing, product development, and sales strategies, among other things. 
  • Product Mix – If your company provides a wide range of products and services, it may be time to examine the breadth of your offerings and ensure that the revenue stream for each is where it should be. This can also apply to geography, especially if you need to adjust your product mix for a specific group of buyers. 
  • Sales Channels – We live in the age of the omnichannel sales approach. For example, the pandemic compelled most businesses to expand their online sales channels or create new ones. Companies that lacked the technological agility to make this transition suffered as a result. 
  • Building partnerships and utilizing indirect sales channels can also play a significant role in revenue growth, but it’s critical to have success metrics and monitoring capability to ensure you’re getting what you need out of indirect channels. 
  • Marketing – It is rare that “if you build it, they will come.” Strategic marketing is essential, but so is tracking its impact on revenue growth. And this is where many businesses fall short. 

Invest in Technology to Automate Your Processes 

Even the best revenue growth strategies will be difficult to implement without the right technology. One of the major impediments to this is the use of legacy technologies by so many businesses, which are too expensive to replace. 

Legacy systems not only stymie agility, but they also don’t get along with updates or modern technology. This can interfere with a company experimenting with innovative approaches to measuring, forecasting, and planning for revenue growth. This is especially true for 21st-century businesses offering new products and sales models, such as B2B SaaS companies. 

Neha Verma
Neha Verma
Neha Verma is a content writer who has 5+ years of experience in writing content in different domains and industries. She has been working with B2B & B2C industries and has created content for presentations, training, worked on web content, and copy content. She specializes in blogging, email marketing, and digital marketing content. Currently, she lives in India.
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