Your sales went from $250,000 last year to $310,000 this year. Great, but how much did you actually grow? 24%? 60%? And is that good?
Revenue growth percentage is one of the first numbers investors, lenders and managers look at. The formula is simple, and you can calculate it in under a minute.
Quick Answer
Revenue growth % = [(Current revenue − Previous revenue) ÷ Previous revenue] × 100
Example: ($310,000 − $250,000) ÷ $250,000 × 100 = 24%.
Step-by-Step: How to Calculate Revenue Growth
- Pick two periods to compare. For example, this year and last year.
- Find the revenue for each period. Current: $310,000. Previous: $250,000.
- Subtract the previous from the current. $310,000 − $250,000 = $60,000.
- Divide by the previous revenue. $60,000 ÷ $250,000 = 0.24.
- Multiply by 100. 0.24 × 100 = 24% growth.
What If Revenue Falls?
The same formula works. A negative result means revenue shrank.
Example: Revenue fell from $400,000 to $340,000.
- ($340,000 − $400,000) ÷ $400,000 = −0.15
- −15% growth (a 15% decline)
Year-Over-Year, Quarterly and Monthly Growth
You can use the same formula for any time period.
| Type | What you compare | Example |
|---|---|---|
| Year-over-year (YoY) | This year vs last year | $310,000 vs $250,000 = 24% |
| Quarter-over-quarter (QoQ) | This quarter vs the previous one | $88,000 vs $80,000 = 10% |
| Month-over-month (MoM) | This month vs last month | $22,000 vs $20,000 = 10% |
For businesses with seasonal sales, comparing with the same period last year (for example, December vs last December) is usually fairer than comparing with the previous month.
Example: Multi-Year Revenue Growth
| Year | Revenue | Growth vs previous year |
|---|---|---|
| 2023 | $200,000 | n/a |
| 2024 | $240,000 | 20% |
| 2025 | $264,000 | 10% |
| 2026 | $290,400 | 10% |
From 2023 to 2026, total growth is ($290,400 − $200,000) ÷ $200,000 = 45.2%.
What Is CAGR (Compound Annual Growth Rate)?
When you want one smooth yearly growth rate over several years, use CAGR.
CAGR = (Ending revenue ÷ Starting revenue)^(1 ÷ number of years) − 1
Using the table above: ($290,400 ÷ $200,000)^(1÷3) − 1 = 1.452^(0.333) − 1 = about 13.2% a year.
Why not just average the yearly rates? Because growth compounds. Imagine revenue of $100 rises 50% to $150, then falls 50% to $75. The average growth is 0%, but you actually lost 25%. CAGR gives the honest picture.
How to Calculate Revenue Growth in Excel or Google Sheets
If last year’s revenue is in cell B2 and this year’s is in B3, type:
=(B3-B2)/B2
Then format the cell as a percentage. For CAGR, use =(END/START)^(1/YEARS)-1.
How to Read the Result
There is no single “good” growth rate. What counts as healthy depends on:
- Industry: Some sectors grow faster than others.
- Company size and age: Small or young businesses often show bigger percentages.
- Economic conditions: Inflation and demand shift results.
- Profitability: Fast growth with no profit may tell a different story.
Compare your numbers with your own past results and with similar companies in your industry.
Common Mistakes to Avoid
- Dividing by the wrong number. Always divide by the previous period, not the current one.
- Ignoring a small starting base. Growing from $1,000 to $3,000 is 200%, but still small in dollars.
- Forgetting inflation. A 5% increase in a year with 5% inflation may mean no real growth.
- Mixing definitions of revenue. Compare like with like, such as net revenue to net revenue.
- Counting one-off sales as normal growth.
- Comparing different time periods, such as a holiday quarter with a slow quarter.
Frequently Asked Questions
What is the revenue growth formula? Revenue growth % = (current revenue − previous revenue) ÷ previous revenue × 100.
What is a good revenue growth rate? It depends on industry, size and stage. Compare against your own history and your peers rather than a single universal number.
What is the difference between revenue growth and profit growth? Revenue is total sales. Profit is what remains after costs. A business can grow revenue and still earn less profit.
Can revenue growth be negative? Yes. A negative result means revenue declined compared with the earlier period.
How do I calculate revenue growth over 5 years? For total growth, use the formula with year 1 and year 5. For a yearly average, use CAGR.
Final Thoughts
To calculate revenue growth percentage, subtract the old revenue from the new, divide by the old, and multiply by 100. Use year-over-year for a clear picture, CAGR for multi-year trends, and always put the number in context.
Sources and Further Reading
- U.S. Securities and Exchange Commission (sec.gov): reading financial statements
- [Add your country’s official business or accounting source]
Disclaimer: This content is for general educational purposes only and does not constitute financial, investment, tax or accounting advice. Please consult a qualified professional before making business or financial decisions.