Legal Definitions - average gross sales

Average gross sales refers to the typical or mean total revenue a business generates from selling its goods or services over a specific period, calculated before any deductions like returns, discounts, or allowances are subtracted. It provides a snapshot of a business's consistent sales performance over time.

Here are some examples to illustrate this concept:

• Imagine a small bakery that wants to understand its monthly revenue consistency. Over the past six months, its gross sales were $15,000, $17,000, $14,500, $16,000, $18,000, and $15,500. To find the average gross sales, the owner would sum these figures ($96,000) and divide by six months. The resulting $16,000 represents the bakery's average monthly revenue before accounting for any returned items or promotional discounts. This figure helps the owner project future income and manage expenses.

• A commercial landlord is negotiating a lease for a new restaurant, where part of the rent will be a percentage of the restaurant's sales. To estimate the potential percentage rent, the landlord might ask for the restaurant chain's average gross sales per location over the last year. If similar restaurants in the chain typically generate $50,000 in gross sales per month, this average helps the landlord set a fair base rent and project the additional percentage rent, even if individual locations have slight variations.

• When a technology startup is seeking investment, potential investors will scrutinize its financial health. The startup might present its average gross sales over the last four quarters to demonstrate a consistent growth trajectory or stable revenue generation. For instance, if their quarterly gross sales were $200,000, $220,000, $240,000, and $260,000, their average gross sales of $230,000 per quarter would show investors a reliable and growing revenue stream, making the company appear more attractive for investment.