Business
Revenue Growth Calculator
Works revenue growth, where the compound rate and the period-on-period rate differ.
Result
CAGR smooths out a bumpy path into one steady rate. Two businesses with identical CAGR can have wildly different year-to-year stability.
Get a Free Business AuditHow the calculation works
Period-on-period growth is the change divided by the earlier figure. Compound annual growth takes the ratio of end to start, raised to the power of one over the number of years, less one, which smooths a lumpy path into the steady rate that would have produced the same result.
What moves the number
- Base period chosen, which changes the percentage.
- Whether the comparison is sequential or year on year.
- Seasonality within the periods compared.
- One-off items in either period.
Where this one goes wrong
A compound annual growth rate describes a smooth path that the business did not follow, which makes it useful for summarising and misleading for planning, since it conceals whether growth is accelerating or decelerating. Look at the actual sequence too. Comparing sequential periods in a seasonal business also produces nonsense, which is why year-on-year comparison is the standard approach where seasonality exists.
Before you quote
- Compare year on year where the business is seasonal.
- Look at the actual sequence, not just the compound rate.
- Strip one-off items from both ends of the comparison.
Questions
About this calculator
What is compound annual growth rate?
The steady annual rate that would have produced the same result over the period. It smooths a lumpy path, which makes it good for summarising and misleading for planning, since it conceals whether growth is speeding up or slowing down.
Should I compare to last month or last year?
Last year, where the business is seasonal, since a sequential comparison in a seasonal business produces nonsense. Comparing the same month across years isolates the growth from the seasonal pattern.
Why does the base period matter so much?
Because growth is expressed as a proportion of it. A weak base produces a flattering percentage and a strong one produces a disappointing figure from identical absolute growth, which is why the absolute numbers belong beside the percentage.
The formula
CAGR = (end ÷ start)^(1 ÷ years) − 1
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How to use this calculator
- Starting revenue ($). Enter your own figure; the page starts at $850,000.
- Current revenue ($). Enter your own figure; the page starts at $1,240,000.
- Years between them. Enter your own figure; the page starts at 3.
The result updates as you type, so you can try a figure, see what it does to total growth, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Starting revenue | $850,000 |
| Current revenue | $1,240,000 |
| Years between them | 3 |
What comes out
| Result | Value |
|---|---|
| Total growth main result | 45.88% |
| Compound annual growth rate | 13.41% |
| Absolute change | $390,000 |
| Next year at the same CAGR | $1,406,337 |
Revenue grew 45.88% over 3 years: a compound rate of 13.41% a year. Another year at that pace would reach $1,406,337.
How sensitive the answer is
Holding everything else steady and changing only starting revenue, this is what happens to total growth. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Starting revenue ($) | Total growth |
|---|---|
| $425,000 | 191.76% |
| $637,500 | 94.51% |
| $850,000 example above | 45.88% |
| $1,275,000 | -2.75% |
| $1,700,000 | -27.06% |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Starting revenue ($)
- A money amount, starting at $850,000.
- Current revenue ($)
- A money amount, starting at $1,240,000.
- Years between them
- A number, between 0 and 100, starting at 3.
What the results tell you
| Result | What it is |
|---|---|
| Total growth | The headline result. A percentage. |
| Compound annual growth rate | A percentage. |
| Absolute change | A money figure. |
| Next year at the same CAGR | A money figure. |
Where these figures usually mislead
Business calculations assume the inputs are steady. Seasonality, a few large customers, and slow payment all break that assumption. A figure that looks healthy annually can still leave you short in a given month.
Keep going
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