Revenue Growth Rate Calculator

About the Revenue Growth Rate Calculator

Measures how fast revenue grows. The simple growth rate compares two periods; CAGR gives the smoothed annual rate over multiple years.

How to use this calculator

1. Enter the starting revenue in the first period.
2. Enter the ending revenue in the later period.
3. Type the number of periods, usually years, between the two values.
4. Read the period-over-period growth and the compound annual growth rate, or CAGR.

The formula explained

The formula \( CAGR = \\left(\\frac{end}{start}\\right)^{1/n} - 1 \) computes the average yearly growth rate that would turn the starting revenue into the ending revenue over \(n\) periods. It smooths out ups and downs so you can compare growth more fairly.

• start = the revenue at the beginning of the time period
• end = the revenue at the end of the time period
• n = the number of periods between the start and end values
• CAGR = compound annual growth rate, written as a decimal or percent

Step by step method

1. Find the period-over-period growth with \(\\frac{end - start}{start}\).
2. For CAGR, divide ending revenue by starting revenue, then take the \(n\)th root of the result.
3. Subtract \(1\) from that value, then convert to a percent if needed.

Worked example

Problem. A company's revenue grows from \(120000\) dollars to \(150000\) dollars over \(3\) years. Find the CAGR.

1. Compute the ratio, \(\\frac{150000}{120000} = 1.25\).
2. Take the cube root, \(1.25^{1/3} \\approx 1.0772\).
3. Subtract \(1\), so \(CAGR \\approx 0.0772\), which is \(7.72\\%\).

Tips and common mistakes

• Make sure \(n\) matches the time unit you want, because years and months give different results.
• Do not use zero or negative starting revenue in the CAGR formula, because the calculation is not defined in the usual way.

Frequently asked questions