Revenue growth:
(current − previous) ÷ previous × 100

How to calculate revenue growth rate

Revenue growth rate is the change in revenue as a percentage of the earlier figure. If sales rose from ₹48 lakh last year to ₹60 lakh this year, growth is 25%. Take the difference, divide by the previous amount, and multiply by 100.

Year-on-year growth compares the same period in two consecutive years, such as financial year to financial year. Comparing like with like removes the effect of seasons, festivals and holidays that would distort a month-to-month comparison.

Year-on-year growth formula

Where revenue growth rate is used

Founders quote it to investors, lenders look at it when assessing a loan, and managers set yearly targets with it. A cloud kitchen, for example, might compare October sales with last October rather than with September, because festive demand changes month to month.

Growth is also the first number people check in annual reports. A single year tells you little, so compare several years in a row. Steady growth of 10% a year says something different from 40% one year followed by a fall, even if the totals over the period come out similar.

If you only have two numbers, the calculator gives you the answer straight away. Enter the earlier revenue as the previous figure and the later one as the current figure, using the same currency and the same definition of revenue for both.

Why a fall and a recovery are not symmetrical

Percentages are measured against a different base each time. If revenue drops from ₹60 lakh to ₹48 lakh, that is -20%. To get back from ₹48 lakh to ₹60 lakh you need growth of 25%, which is bigger than the fall.

Remember this when a bad quarter is followed by a good one. A 20% rebound after a 20% fall still leaves you below where you started.

The small-base effect and what else to look at

A new product line selling ₹5 lakh last year and ₹8 lakh this year shows 60% growth, which sounds dramatic. A mature line growing from ₹100 lakh to ₹108 lakh shows only 8%, yet adds far more money. Growth rate and growth in rupees tell different stories, so look at both.

• Use the same period length and the same revenue definition in both periods.
• Strip out one-off sales if you want to judge the underlying trend.
• Prices matter: growth can come from selling more units or from charging more per unit.
• Check the previous figure: growth cannot be calculated from zero.

Common mistakes with revenue growth

• Dividing by the current revenue instead of the previous revenue.
• Subtracting percentages instead of working from the amounts.
• Comparing a full year with a part year.
• Mixing currencies or including tax in one period and not the other.