How to calculate your revenue growth rate
Revenue growth rate shows how fast your sales are rising or falling between two periods. Here is the formula, two worked examples and the mistakes to avoid.
The revenue growth formula
Revenue growth rate (%) = (revenue this period − revenue last period) ÷ revenue last period × 100
A positive result means revenue grew. A negative result means it fell. This is also called the sales growth percentage.
Worked examples in AED
Two examples
| Comparison | Previous period | Current period | Growth rate |
|---|---|---|---|
| Month-on-month | AED 150,000 | AED 165,000 | 10% |
| Year-on-year | AED 1,800,000 | AED 1,620,000 | −10% |
In the first example, revenue rose by AED 15,000 on a base of AED 150,000, which is a growth rate of 10%. In the second, revenue fell by AED 180,000 on a base of AED 1,800,000, which is a growth rate of −10%.
Common mistakes
- Comparing unequal periods. A 31-day month against a 28-day month can distort monthly growth.
- Ignoring seasonality. For seasonal businesses, compare a period with the same period a year earlier. Watch for Ramadan, which starts about 11 days earlier each year, and the summer slowdown.
- Mixing one-off revenue with recurring revenue. A single large order can make growth look stronger than it is.
Frequently asked questions
What is the difference between month-on-month and year-on-year growth?
Month-on-month (MoM) growth compares one month with the month before it. Year-on-year (YoY) growth compares a period with the same period a year earlier, which removes most seasonal effects.
Can the revenue growth rate be negative?
Yes. A negative growth rate means revenue fell between the two periods.