Revenue Growth Rate Calculator
Enter the starting revenue, the ending revenue and the number of periods to find the average compound growth rate per period.
Updated
Revenue Growth Rate Calculator
Our Revenue Growth Rate Calculator finds the average rate at which revenue grew in each period between two figures. Enter the starting revenue, the ending revenue and the number of years, quarters or months between them, and the compound growth rate per period appears at once. With yearly periods it is the compound annual growth rate (CAGR), the figure analysts, investors and founders use to compare growth over different time spans.
Quick answer
Revenue growth rate is (final ÷ initial)^(1 ÷ periods) − 1: (750,000 ÷ 500,000)^(1/5) − 1 ≈ 8.45% a year.
- Per period: the result is an average for each year, quarter or month.
- Compounded: each period grows on the larger base of the one before.
- Not total ÷ periods: 50% over 5 years is 8.45% a year, not 10%.
- Negative rate: revenue fell on average over the span.
What Is the Revenue Growth Rate?
The revenue growth rate is the steady percentage by which revenue would have to grow each period to go from the starting figure to the ending figure. It turns a change over several periods into one comparable yearly, quarterly or monthly rate. When the periods are years it is called the compound annual growth rate, or CAGR.
= ((Final ÷ Initial)^(1 ÷ n)
− 1) × 100
- Initial revenue: revenue in the first period.
- Final revenue: revenue in the last period.
- n: the number of periods between them. From year 0 to year 5 is 5 periods, not 6.
How to Calculate the Revenue Growth Rate
A retail chain had revenue of 500,000 five years ago and 750,000 now:
1.5^(1/5) ≈ 1.0845
1.0845 − 1 = 0.0845 ≈ 8.45%
- Divide final by initial. 750,000 ÷ 500,000 = 1.5, so revenue is 1.5 times larger.
- Take the n-th root. Raise 1.5 to the power 1 ÷ 5 (the fifth root): about 1.0845.
- Subtract 1 and multiply by 100. The average growth rate is about 8.45% a year.
Growing 8.45% a year for five years turns 500,000 into 750,000:
| Year | Revenue at 8.45% |
|---|---|
| Year 0 | 500,000 |
| Year 1 | 542,236 |
| Year 2 | 588,040 |
| Year 3 | 637,712 |
| Year 4 | 691,581 |
| Year 5 | 750,000 |
Revenue Growth Rate Examples
| Initial → Final, periods | Rate |
|---|---|
| 1,200,000 → 1,250,000, 3 years | ≈ 1.37% |
| 500,000 → 750,000, 5 years | ≈ 8.45% |
| 80,000 → 100,000, 4 quarters | ≈ 5.74% |
| 400,000 → 300,000, 2 years | ≈ −13.4% |
A software company that went from 1,200,000 to 1,250,000 in three years grew about 1.37% a year. A subscription service that went from 80,000 to 100,000 over four quarters grew about 5.74% a quarter. The rate is always per period of the unit you count.
Growth Rate vs Total Revenue Growth
- Total growth is the whole change between two figures: 500,000 to 750,000 is 50%.
- Growth rate per period spreads that change over time with compounding: 8.45% a year for 5 years.
Dividing 50% by 5 gives 10%, which is too high: 10% a year compounded for 5 years would reach about 805,000, not 750,000. The per-period rate also lets you compare a 3-year track record with a 5-year one, which total growth cannot.
Forecasting With a Growth Rate
Once you know the rate, project revenue forward by multiplying by (1 + rate) once for every period:
= Revenue × (1 + rate)^k
At 8.45% a year, 750,000 becomes about 750,000 × 1.0845 ≈ 813,354 next year. The calculator shows this figure as "Next period at this rate". Forecasts assume the past rate continues, so treat them as a scenario, not a promise.
Limitations and Common Mistakes
- It hides the path. Two businesses with the same rate may have had a smooth rise or a boom and a crash. Look at each period too.
- Counting periods wrong. From year 1 to year 4 is 3 periods. Using 4 understates the rate.
- Mixing units. A monthly rate is not a yearly rate. 2% a month compounds to about 26.8% a year.
- Zero or negative revenue. The formula needs both figures above 0.
- Ignoring costs. Fast revenue growth can come with falling profit.
Key Terms
- Growth rate
- Average compound growth per period.
- CAGR
- Compound annual growth rate: the rate with yearly periods.
- Periods (n)
- Intervals between the two figures.
- Total growth
- (Final − initial) ÷ initial × 100.
- Compounding
- Growth on top of earlier growth.
How to Use the Revenue Growth Rate Calculator
- Enter the initial revenue. Type the revenue in the first period, such as 500,000. It must be more than 0.
- Enter the final revenue and the periods. Type the revenue in the last period, such as 750,000, and the number of periods between them, such as 5 years.
- Read and copy the result. The growth rate per period appears as you type, with the working, the total growth, the revenue change and the revenue for the next period at the same rate. Press Copy to copy it, or Clear or Esc to start again.
Example: initial revenue 80,000, final revenue 100,000 and 4 quarters. The result is about 5.74% a quarter, from 1.25^(1/4) − 1 ≈ 5.74%.
Who Can Use This Calculator?
Frequently Asked Questions (FAQs)
How do you calculate the revenue growth rate?
Divide final revenue by initial revenue, raise the result to the power 1 ÷ number of periods, subtract 1 and multiply by 100. Growth rate = ((final ÷ initial)^(1 ÷ n) − 1) × 100.
What is the growth rate from 500,000 to 750,000 over 5 years?
About 8.45% a year. 750,000 ÷ 500,000 = 1.5, 1.5^(1/5) ≈ 1.0845, and 1.0845 − 1 ≈ 8.45%.
Is the revenue growth rate the same as CAGR?
Yes, when the periods are years. With quarters or months the same formula gives a quarterly or monthly compound rate.
Why not just divide total growth by the number of years?
Because growth compounds. 50% over 5 years divided by 5 gives 10%, but 10% a year compounded would reach about 805,000 from 500,000, not 750,000. The correct rate is about 8.45%.
What do the number of periods represent?
The intervals between the two revenue figures, in any consistent unit: years, quarters or months. From year 0 to year 5 is 5 periods.
Can the growth rate be negative?
Yes. If final revenue is lower than initial revenue, the rate is negative. 400,000 falling to 300,000 over 2 years is about −13.4% a year.
How is this different from the Revenue Growth Calculator?
The Revenue Growth Calculator gives the total percentage change between two figures. This calculator spreads that change over several periods as an average compound rate.
Is the Revenue Growth Rate Calculator free?
Yes. It is completely free, needs no sign-up, and can be used as many times as you like.
Sources
- Wikipedia. Compound annual growth rate.
- Corporate Finance Institute. CAGR (Compound Annual Growth Rate).
- Wall Street Prep. CAGR Formula and Calculations.
- Wall Street Prep. Growth Rate: Formula and Calculator.
- Wikipedia. Exponential growth.
Use our Revenue Growth Rate Calculator to see how fast your revenue grows each period in seconds.