A wise man once said: "not conducting a revenue analysis is like trying to lose weight without keeping track of the scales. You won’t know what works, what doesn’t, and whether any progress is being made." A sales analysis is crucial to every business.
But what exactly is a sales revenue analysis and how do you get started on it? Here’s what you should know:
A sales revenue analysis is an analysis of the history of sales year-by-year, or quarter-by-quarter, to see how a business is performing and make predictions on how it will perform in the future (sales forecast).
A sales revenue analysis not only looks at the revenue generated but also other factors that might influence the revenue. This includes looking at product launch dates, popular products, customer demographics, ad spend, and more.
In conjunction to a sales revenue analysis is a sales trend analysis which looks at the fluctuation of sales over time:
Do sales dip or peak during weekends? Do certain products sell better at different times (e.g. Christmas)?
A revenue analysis allows businesses to keep track of where they're at, and make accurate assessments on where to spend their resources in order to maximize profits.
A revenue analysis will guide your business on how to manage its inventory: when to increase or decrease the stock of a product based on supply/demand.
The 4 types of revenue analysis are:
A sales revenue analysis looks at the total revenue generated over different time periods. It also looks at the sales across different products and customers.
Revenue analysis formula: Revenue = Number of units sold x Average price of each item
Revenue analysis example:
Last year, Bob sold 600 iPhones retailed at $900 each. The total revenue = 600 x $900 = $540,000
However, 100 of those iPhones were discounted 10% to $810. The new average price for each iPhone will be $885, so the total revenue generated is 600 x $885 = $531,000.
Creating a sales revenue report:
A sales revenue report is a document outlining all sales a company has made and the total revenue generated over a certain time period. This data is plotted onto a time-series graph.
If you’re doing it in Excel, it can be time-consuming, but with a sales report tool like Polymer Search, you can instantly generate a sales revenue report in seconds.
Example sales revenue report template:
Note: Cogs = cost of goods.
A customer revenue analysis looks at the revenue generated from your customers and breaks them down into different categories around demographics, products purchased, and purchase dates.
What are the demographics of your customers? Important demographic data to collect are:
Other important information include: marital status, children (if any), occupation, political views, and religious views (if any).
Some customers may only purchase an item only when it’s on sale, or during special seasons like Christmas. It’s important to identify these reasons and key sales dates.
A product revenue analysis looks at how each product/service is performing and aims at finding the top performers.
What exactly defines a “top performer?”
In order to find the top performer, we need to follow the Pareto principle, which is a well-established phenomenon in economics and often applied to business.
The Pareto principle states that 80% of the results come from the top 20% of performers. And that’s how we’ll define “top performer.”
The top performers are often the top 20% of products.
A revenue trend analysis looks at a business’s revenue over a certain time period: usually quarterly or yearly.
Revenue trend analysis allows us to see fluctuations in sales over time. Come fluctuations are:
You run a cake store. In order to run this store, you need to buy the ingredients + bake the cake. This takes time, effort, and money.
Now your store offers two types of cakes: sponge cakes and chocolate cakes.
You realize that 80% of the sales come from chocolate cakes. And sales double during weekends and holiday seasons.
If you didn’t take into account the data, you would’ve wasted a lot of money and time making sponge cakes nobody will buy. On top of that, you’ll be losing profits for not having enough supply during weekends and holiday seasons.
A revenue trend analysis allows you to discover these trends, make sales forecasts, and plan resources accordingly to maximize profit and revenue.
Before any analysis can be performed, you need to be collecting the right data. What data should you be collecting? Here’s a shortlist:
This will be a good starting point.
Having a tool that makes data analysis quick and easy is ideal for your business as it won’t require much training.
Tools often have data connectors that allow you to directly import from the original source and update the data in real-time. This can save a lot of time and energy from manual data entry work.
Polymer Search is a sales analysis tool that’ll allow you to quickly draw insights from your data without any technical knowledge required. It’s faster, simpler and more powerful than Google Sheets or Excel.
If using Polymer, upload your data to the Polymer web tool and choose “launch app.” This will create an interactive application where you can use AI to help you analyze your data.
Common techniques for analysis are: interactive tables, pivot tables, time series, bar charts and the auto-insights tool.
Start your analysis by looking at:
Once that is done, perform some more in-depth analysis by looking at:
Understanding the potential pitfalls in revenue analysis can prevent costly mistakes and ensure the accuracy of your insights.
1. Relying Solely on Historical Data: While past data is essential, it shouldn't be the only basis for future projections. Market dynamics, consumer behavior, and external events can all influence future revenues.
2. Not Accounting for Seasonality: Some businesses have peak seasons, and failing to account for this can distort analysis results.
3. Overlooking External Factors: Economic downturns, new regulations, or global events can significantly impact revenues. Ignoring these can lead to skewed interpretations.
4. Using Outdated Tools: The digital age offers advanced analytical tools. Relying on outdated methods can hinder your ability to derive deep insights.
5. Not Regularly Updating Analysis: Revenue analysis is not a one-time task. Regular updates ensure that you're always working with the most recent and relevant data.
As businesses evolve and data becomes more accessible, new techniques in revenue trend analysis have emerged to offer deeper insights.
1. Predictive Analytics: Using machine learning and AI, predictive analytics can forecast future trends based on past and current data, giving businesses a competitive edge.
2. Cohort Analysis: Instead of looking at all customers as a single unit, cohort analysis breaks them down into related groups. This can provide insights into how specific segments behave over time.
3. Real-time Analysis: With advancements in technology, businesses can now analyze revenue trends in real-time, allowing for swift adjustments in strategy.
4. Multi-dimensional Analysis: This involves examining more than two variables simultaneously. For instance, analyzing revenue trends by product, region, and customer demographic simultaneously.
5. Sentiment Analysis: Integrating sentiment analysis with revenue trends can provide insights into how public perception impacts sales.
Finally, to kickstart your data analysis, you can practice using a sample dataset from Polymer Search.
Sales data analysis isn't difficult, especially with all the modern tools at your disposal. No more headaches with Excel or Google Sheets.
Get started using Polymer Search and find meaningful conclusions from your data.
See for yourself how fast and easy it is to create visualizations, build dashboards, and unmask valuable insights in your data.Start for free