One of the ways to really make an impact on your sales is to not only know your numbers, but know how to calculate them? It is amazing to me the number of Salespeople I’ve come across who are fantastic in selling, but can’t do the math. If your commissions are bound by sales margin then selling $70,000 per month at a 30% margin is the same as selling $42,000 at 50 percent. If you can manage your margins you can work smarter, not harder. The following are a few equations that will help you keep track of how you are doing so there are no surprises at the end of the month.
Gross Margin Percentage.
(( Total sales-Cost of goods sold(COGS))/Total Sales) *100
Lets say you sold $50,000 in paper clips and those clips cost you $25,000. Your equation would be: $50,000-$25,000=$25,000. Then Divide $25,000 by $50,000 ($25,000/$50,000)=0.5 and multiply 0.5 by 100 to get 50%
Sales Growth Percentage.
(Current sales-Previous Sales)/Previous Sales
Your previous sales could be your sales from last month, last year etc. Say you wanted to find your Horizontal growth (growth over January). This month your sales were $100,000 and in January your sales were $60,000. Your equation would look like this:
Take your 0.66667 and multiply it by 100 to get 66.6%. Congratulations! You grew your sales 66.6% over January. This equation is always used to calculate growth. Here’s another Example. Lets say your last year sales were $1,750,567 (wouldn’t that be nice) and this years sales were $1,655,462. Here’s your equation:
($1,655,462-$1,750,567)/$1,750,467= -0.05427, multiply that by 100 to get your percentage. = -5.42%. Sorry, you had negative growth over last year. You better hit the streets!!
Where are you pacing?
Another important number to know is how you are trending or pacing. When I was branch manager I would always ask my outside salespeople what their numbers were. Most of the time they could tell me how they were doing as far as growth, percent of goal, margin etc. The one number they always struggled with was how they were pacing. Figuring out this number takes a little more effort than most equations. Here’s how you do it.
Step One. You have to figure out how many sales days are in the month you are in. Sales days usually run between 20 and 22 per month.
Step Two. How many sales days have gone by? Lets say it’s the middle of the month and 10 days have gone by.
Step Three. Find your daily average. You take your month to date sales number, lets say $20,000 and divide it by the number of days gone by (we decided 10 days in step Two.) $20,000/10= $2000. This number is called “Daily Average”.
Step Four. You take your Daily Average ($2000) and multiply it by the total number of sales days in the month (lets say 21). $2000 * 21 days= $42,000. $42,000 is where you are pacing for the month. The daily average is an important number since sales days vary per month. You can look at your sales numbers month to month and think you are dong pretty well. Lets say in February you sold $40,000 and in March you sold $43,000. By looking at these numbers alone you would say that you sold more in March. But if you take the daily average you can see that you actually sold more in February. Here’s how:
February had 20 sales days and March had 23 sales days. February’s daily average is $40,000/20= $2000 and March is $43,000/23= $1870. Always look at your daily average!!