# Formulas for Sales Analysis

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Out of context, raw sales data have no meaning or purpose. Even a huge amount won’t provide the insight you need to maximize sales and operational efficiency. In the same way, sales analysis formulas are simply a group of mathematical symbols having the potential to express relationships. Combining the two is the only way to organize information into a format that transforms raw sales data into information, information into knowledge and knowledge into insight.

## Sales Force Performance

Performance formulas provide insight into whether salespeople are actively selling or simply servicing customers. Vary the raw data to analyze sales force performance as a group or to analyze individual salespeople. The formula "gross sales/total hours worked" determines sales dollars per hour. The formula "total number of sales/number of full-time-equivalent salespeople" determines sales per salesperson. The formula "gross sales/number of full-time-equivalent salespeople" determines sales dollars per salesperson, and the formula "gross sales/number of sales transactions" determines average dollars per sale.

## Sales Versus Customer Acquisition Costs and Profit

Businesses that sell high value products or services can use acquisition and profit formulas to determine which customers are the most profitable, which might benefit from cross-selling and which the business might consider dropping. The formula is total annual sales minus customer acquisition cost. For example, if it costs a business \$2,000 on average to acquire a new customer and annual sales are \$5,000, the gross profit is \$3,000. Further analysis will determine the best action a business should take based on these data.

## Product and Sales Area Formulas

A business can use the sales-by-product-type formula -- (product or product line gross sales/total gross sales) 100 -- to analyze a specific product or product line. This formula is useful for analyzing demand and spotting buying trends. For example, decreasing numbers can help a business determine when a once popular product is nearing the end of its life cycle. In the same way, a sales-by-geography formula is useful for analyzing external or internal sales. The business can insert gross sales for a sales division, department or territory into the formula (gross geographic sales/total gross sales) 100 and analyze results to determine, for example, whether expanding the sales staff is necessary or whether or not divisions or departments are performing as expected.

## Sales Price Variance

The sales variance formula is useful in sales revenue analysis. The formula is (actual selling price minus standard selling price) * unit sales. A positive sales price variance indicates more products than the business anticipated were sold at the asking price. Further analysis might reveal the reason relates to decreased competition, better promotion or an aggressive sales campaign. A negative sales price variance indicates that fewer products than anticipated sold at the asking price. Further analysis is necessary to find out whether the reason relates, for example, to increased competition or decreasing demand.

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