Revenue Growth Formula
Learn how revenue growth, revenue change, average monthly change, and compound monthly growth are calculated.
The Revenue Growth Calculator compares revenue at two points in time to estimate how much revenue changed in absolute terms and as a percentage. It also helps you understand the average monthly change and the compounded monthly growth needed to move from the starting value to the ending value over the selected period.
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Revenue Growth Rate
Where:
Subtract the starting revenue from the ending revenue to get the change, then divide by the starting revenue and multiply by 100 to express that change as a percentage.
Variables Explained
| Variable | What It Means | Unit |
|---|---|---|
| startingRevenue - Starting revenue | Revenue in the earlier period being compared. | currency |
| endingRevenue - Ending revenue | Revenue in the later period being compared. | currency |
| periodLength - Period length | Number of months between the two revenue figures. | months |
| revenueChange - Revenue change | Absolute increase or decrease in revenue between the two periods. | currency |
| growthRate - Revenue growth rate | Percentage change from starting revenue to ending revenue. | percent |
| averageMonthlyChange - Average monthly change | Average increase or decrease in revenue per month over the selected period. | currency |
| cmgr - Compound monthly growth rate | Average monthly compounded growth rate across the period. | percent |
Step-by-Step Calculation
Calculate revenue change
Find the absolute amount revenue increased or decreased over the full period.
revenueChange = endingRevenue - startingRevenue
Calculate the overall growth rate
Divide the revenue change by the starting revenue and convert it to a percentage.
growthRate = ((endingRevenue - startingRevenue) / max(startingRevenue, 1)) * 100
Calculate average monthly change
Spread the total change evenly across the number of months to estimate the average monthly change.
averageMonthlyChange = (endingRevenue - startingRevenue) / max(periodLength, 1)
Calculate the revenue ratio
Express the ending revenue as a multiple of the starting revenue before calculating compounded monthly growth.
revenueRatio = max(endingRevenue, 0) / max(startingRevenue, 1)
Calculate compound monthly growth rate
Estimate the monthly compounded rate that would turn the starting revenue into the ending revenue over the selected number of months.
cmgr = (pow(max(endingRevenue, 0) / max(startingRevenue, 1), 1 / max(periodLength, 1)) - 1) * 100
Example: Annual revenue growth over 12 months
Revenue change
125000 - 100000
25000
Growth rate
(25000 / 100000) × 100
25%
Average monthly change
25000 / 12
2083.33
Compound monthly growth rate
(pow(125000 / 100000, 1 / 12) - 1) × 100
1.88%
Final Result
Revenue changed by $25,000, total revenue growth was 25%, average monthly change was about $2,083.33, and compound monthly growth was about 1.88%.
Assumptions
- ✓The calculator compares two revenue figures over one continuous period.
- ✓Starting and ending revenue are measured in the same currency and on the same accounting basis.
- ✓The period length is entered in months and correctly matches the time between the two revenue values.
- ✓Compound monthly growth assumes smooth compounded growth, even if actual revenue changed unevenly.
Limitations
- !Results only measure revenue change, not profit, margin, cash flow, or expenses.
- !Seasonality, one-time events, and irregular sales cycles are not reflected in the formulas.
- !If starting revenue is very low or zero, percentage-based results can be less meaningful.
- !Average monthly change is a simple average and does not show month-by-month volatility.
Common Mistakes to Avoid
Using revenue figures from different accounting methods, such as mixing cash basis and accrual basis.
Entering quarterly or yearly figures without matching the correct number of months in the period length.
Interpreting revenue growth as profit growth even though expenses are not included.
Comparing revenue from seasonal periods without considering timing differences.
Assuming compound monthly growth shows actual monthly performance rather than an equivalent smoothed rate.
Related Formulas
Frequently Asked Questions
What is the formula for revenue growth percentage?
The basic formula is ((ending revenue - starting revenue) / starting revenue) × 100. This shows the percent increase or decrease between two periods.
How do you calculate revenue change in dollars?
Subtract starting revenue from ending revenue. A positive result means growth, while a negative result means a decline.
What is average monthly revenue change?
It is the total revenue change divided by the number of months in the period. It shows the average amount revenue changed each month.
What is compound monthly growth rate in revenue?
Compound monthly growth rate is the monthly compounded rate that would turn the starting revenue into the ending revenue over the chosen period.
Why is revenue growth different from compound monthly growth?
Revenue growth measures total change across the full period, while compound monthly growth converts that same change into an equivalent monthly compounded rate.
Can revenue growth be negative?
Yes. If ending revenue is lower than starting revenue, the revenue change, growth rate, and often the average monthly change will be negative.
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