Growth Rate Calculator

How the figure is built

Growth rate over a period is (ending value − starting value) ÷ starting value × 100. Compound growth over multiple periods is the geometric rather than arithmetic average.

CAGR = (ending ÷ starting)^(1 ÷ periods) − 1, which is the rate that would produce the observed result if applied consistently.

Averaging period growth rates arithmetically overstates compound growth, and the error grows with volatility.

The same thing with real figures

Revenue growing from $580,000 to $1,020,000 over three years: total growth is 75.9%, and CAGR is (1,020,000 ÷ 580,000)^(1÷3) − 1 = 20.7% a year.

Now the arithmetic error: if the three annual rates were 45%, 5% and 15%, their arithmetic mean is 21.7%. Applied compound, that would give $1,046,000 rather than $1,020,000.

The gap is small here and grows quickly with volatility. Three years at 100%, −50% and 100% average 50% arithmetically and produce a CAGR of 26%.

Any business with uneven growth that reports an average of its annual rates is overstating its compound performance.

The catch

Growth rates flatter small bases arithmetically. A business going from $20,000 to $40,000 has grown 100%, which is not comparable to the same rate on $2m.

Comparing across periods of different lengths is also a common error, and annualising a strong quarter assumes a seasonal peak repeats four times.

Applying it

Use CAGR for multi-period comparison and state the base alongside the rate. A percentage without a base is close to uninformative.

Then look at absolute growth as well. A business adding $200,000 of revenue is doing something real whether that is 40% or 8%, and percentage-only reporting makes larger businesses look stagnant.

Why growth rate decays and what to do about it

A business growing by adding a roughly constant absolute amount each year shows a declining percentage growth rate purely from arithmetic, since the denominator grows.

That is normal and it is frequently misread as deterioration. Distinguishing between falling absolute growth, which is a real problem, and falling percentage growth on a rising base, which is arithmetic, is worth doing before reacting.

The businesses that sustain high percentage growth do so by adding new sources: products, channels, markets, rather than by growing the existing one faster. Recognising which of the two a plan depends on is usually the difference between a forecast that holds and one that does not.

Comparing growth against the market's own growth separates company performance from category performance, since growing 15% in a category growing 25% is losing share.

That comparison requires a market estimate and is worth making even approximately, because the strategic implication of the two situations is entirely different.

Reporting absolute change alongside the percentage prevents the common distortion where a large business appears to be stagnating while adding more revenue than a fast-growing small one.

Separating growth into its components: more customers, more frequent purchase, larger orders, shows which mechanism is producing it and therefore whether it can continue.

Distinguishing between growth funded by reinvested profit and growth funded by working capital matters for how sustainable it is, since only the first continues without external support.