How to calculate your revenue growth rate
Revenue growth rate shows how fast your sales, or turnover, are rising or falling between two periods. Here's 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. You may also see this called the sales growth formula, and many UK small businesses talk about turnover growth rather than revenue growth. The calculation is the same. You'll find both figures in your profit and loss account or in accounting software such as Xero, Sage, FreeAgent or QuickBooks.
Worked examples
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, revenue rose by £3,000 on a base of £30,000: a growth rate of 10%. In the second, revenue fell by £40,000 on a base of £400,000: a growth rate of −10%.
Common mistakes
- Comparing unequal periods. A 31-day month against a 28-day February can distort month on month growth.
- Ignoring seasonality. If Christmas trading, the January sales or the summer holidays shape your takings, compare a period with the same period a year earlier.
- 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 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, or turnover, fell between the two periods.