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 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.
Worked examples
Two examples
| Comparison | Previous period | Current period | Growth rate |
|---|---|---|---|
| Month over month | $40,000 | $44,000 | 10% |
| Year over year | $500,000 | $450,000 | −10% |
In the first example, revenue rose by $4,000 on a base of $40,000: a growth rate of 10%. In the second, revenue fell by $50,000 on a base of $500,000: 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.
- 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, which removes most seasonal effects.
Can the revenue growth rate be negative?
Yes. A negative growth rate means revenue fell between the two periods.