Revenue Growth Calculator

Compound annual growth rate converts a total change into the steady yearly rate that would have produced it. It is the only fair way to compare growth over different periods, and it is not the number you get by 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. 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. 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 says nothing about volatility, momentum, or whether the trend is still intact.

That matters when the rate is used as a forecast. A CAGR computed across a period containing an unusual event — a one-off contract, a pandemic, an acquisition — will project that event forward as if it recurs annually. Check the intervening years before you extend the line.

Choosing the start point is equally loaded. Beginning the measurement in an unusually weak year inflates the rate; beginning in a strong one deflates it. Any published growth figure should be read with an eye on where the clock was started.

No targets, no required rate

There is no target revenue input and no "required growth rate" output. This measures growth that has already happened between two figures you supply; it does not solve backwards for the rate you would need to reach a goal.

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

Nominal, and only nominal

The rate is computed on the numbers as entered. It contains inflation.

A business whose revenue compounds at 17% while prices rise at 6% is growing at roughly 10.4% in real terms — meaningfully strong, but not what the headline says. Over a four-year window that difference compounds into a large gap between reported and real expansion. It is also worth separating 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 conflates them.

The formula works on any pair of positive values, so it is 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 is not relevant, 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.