How to calculate your revenue growth rate
Your revenue growth rate shows how quickly sales are climbing or dropping between two periods. Here's the formula, two examples in Canadian dollars and the pitfalls to avoid.
The formula
Revenue growth rate (%) = (revenue this period − revenue last period) ÷ revenue last period × 100
Above zero, revenue went up; below zero, it went down. Some owners call this the sales growth rate.
Worked examples
Two Canadian examples
| What you compare | Earlier period | Later period | Growth rate |
|---|---|---|---|
| Month over month | $55,000 | $60,500 | 10% |
| Year over year | $700,000 | $630,000 | −10% |
A Toronto marketing agency billed $55,000 in September and $60,500 in October, an increase of $5,500. Divided by $55,000, that is 10%. A Halifax seafood exporter's sales fell from $700,000 last fiscal year to $630,000, a drop of $70,000. Divided by $700,000, that is −10%.
Common mistakes
- Comparing periods of different lengths. January has 31 days and February has 28, which can distort monthly growth.
- Overlooking seasonal swings. Winter slowdowns, summer tourism and Boxing Day sales move revenue sharply. If your business is seasonal, compare each period with the same period a year before.
- Treating one-time revenue as recurring. One big contract can make growth look stronger than it is.
Frequently asked questions
How is month-over-month growth different from year-over-year growth?
Month-over-month growth compares one month with the previous one. Year-over-year growth compares a period with the same period a year earlier, so most seasonal swings cancel out.
Is a negative revenue growth rate possible?
Yes. A result below zero means revenue was lower in the second period than in the first.