Revenue Growth Calculator

Compound annual growth rate turns a total change into the steady yearly rate that would have produced it. It's the only fair way to compare growth over different periods, and you won't get it by simply dividing.

From two endpoints

Revenue of 480,000 four years ago, 900,000 now:

• Total growth: 87.5%
• Expansion multiple: 1.88x
• CAGR: 17.02%
• Absolute increase: 420,000

CAGR = ((end ÷ start)^(1 ÷ years) − 1) × 100

Dividing the total growth by the number of years gives 21.88%, and that figure is wrong because it ignores that each year's growth compounds on the previous year's larger base. Growing at 21.88% a year for four years would have taken 480,000 to about 1,059,000, well past where the business actually landed.

What the endpoints hide

The calculation uses exactly two numbers and a duration, so everything in between is invisible.

A business that grew steadily at 17% for four years and one that was flat for three years and then acquired a competitor in the fourth produce the identical CAGR. So does one that grew 60% in year one and declined afterwards. The smoothed rate tells you nothing about volatility, momentum, or whether the trend is still intact.

This becomes a problem when the rate is used as a forecast. A CAGR computed across a period containing an unusual event, such as a one-off contract, a pandemic or an acquisition, will project that event forward as if it recurred every year. Check the years in between before you extend the line.

Choosing the start point is just as loaded. Starting the measurement in an unusually weak year inflates the rate, and starting in a strong one deflates it. Whenever you read a published growth figure, look at where the clock was started.

No targets, no required rate

There's no target revenue input and no "required growth rate" output. This measures growth that has already happened between two figures you supply. It doesn't solve backwards for the rate you'd need to reach a goal.

If you want that, you can rearrange the same formula by hand: divide the target by the current figure, take the appropriate root, and subtract one.

The rate is nominal

The rate is computed on the numbers as entered, so inflation is baked into it.

A business whose revenue compounds at 17% while prices rise at 6% is growing at roughly 10.4% in real terms. That's still meaningfully strong, but it isn't what the headline says. Over a four-year window the difference compounds into a large gap between reported and real expansion. You'll also want to separate price rises from volume. Revenue growth driven entirely by putting prices up is a different business story from growth driven by selling more units, and the top-line figure lumps the two together.

The formula works on any pair of positive values, so it's equally valid for subscriber counts, units shipped or the value of a portfolio.

Related growth and return tools

To measure a total return where the holding period doesn't matter, use the ROI calculator. To convert the nominal rate above into real terms, use the inflation calculator. To model the same compounding maths applied to a lump sum of money, use the compound interest calculator.