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 in euros 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. Some people call this the sales growth rate. In Spanish accounts and in reports from your accountancy and admin firm (gestoría), revenue usually appears as facturación.
Worked examples in euros
Two examples
| Comparison | Previous period | Current period | Growth rate |
|---|---|---|---|
| Month on month | €30,000 | €33,000 | 10% |
| Year on year | €400,000 | €360,000 | −10% |
In the first example, the revenue of a Barcelona start-up rose by €3,000 on a base of €30,000. That is a growth rate of 10%. In the second, the revenue of a Málaga holiday-rental business fell by €40,000 on a base of €400,000. That 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, for example this August with last August.
- 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 compares one month with the month before it. Year-on-year (often shortened to YoY) 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.