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 Mexican pesos 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. The formula also works as a sales growth rate formula.
Worked examples in Mexican pesos
Two examples
| Comparison | Previous period | Current period | Growth rate |
|---|---|---|---|
| Month over month | MXN 800,000 | MXN 880,000 | 10% |
| Year over year | MXN 9,000,000 | MXN 8,100,000 | −10% |
In the first example, revenue rose by MXN 80,000 on a base of MXN 800,000. This is a growth rate of 10%. In the second, revenue fell by MXN 900,000 on a base of MXN 9,000,000. This is a growth rate of −10%.
Common mistakes
- Comparing unequal periods. A 31-day month compared with 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, compare November (El Buen Fin) with the previous November.
- 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-over-month and year-over-year growth?
Month-over-month compares one month with the month before it. Year-over-year compares a period with the same period a year earlier. This removes most seasonal effects, such as El Buen Fin.
Can the revenue growth rate be negative?
Yes. A negative growth rate means revenue fell between the two periods.