How to calculate your revenue growth rate
Revenue growth rate shows how fast your sales (turnover) are rising or falling between two periods. Here is the formula, two worked examples in rand 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.
Worked examples in rand
Two examples
| Comparison | Previous period | Current period | Growth rate |
|---|---|---|---|
| Month on month | R250,000 | R275,000 | 10% |
| Year on year | R3,000,000 | R2,700,000 | −10% |
In the first example, a Cape Town coffee roaster's revenue rose by R25,000 on a base of R250,000: a growth rate of 10%. In the second, a Durban online retailer's revenue fell by R300,000 on a base of R3,000,000: a growth rate of −10%.
Common mistakes
- Comparing unequal periods. A 31-day January against a 28-day February can distort monthly growth.
- Ignoring seasonality. For seasonal businesses, such as a guesthouse busiest over December, compare a period with the same period a year earlier.
- Mixing once-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 (sometimes written 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.