Every business chases growth. But seeing bigger numbers isn’t enough. What matters is understanding how fast you’re moving, not just how far. That’s where growth rate comes in.
When someone talks about growth rate, they’re talking about the pace of change, whether it’s revenue, customers, website traffic, or even something as simple as email signups. Growth rate answers the question: “How much did we move forward, compared to where we started?”
It isn’t about showing off big numbers. It’s about context. A $10,000 bump in sales means something different to a global company than it does to a small shop. Growth rate puts everything on a level field.
PS: Most people first encounter growth rate as a formula. But before you dive into the math, know this: growth rate is really a story about momentum and about whether your efforts are actually moving the needle.
What is growth rate?
Growth rate explains how much something changes relative to where it began. You choose a period, note the value at the start, note the value at the end, and compare them. It reveals the pace at which things are changing, and it does this in a way that makes sense no matter how large or small your starting point is.
Imagine you’re tracking revenue, user signups, or even monthly expenses. If you only look at the final number, you miss the bigger picture. Growth rate bridges that gap by asking, “How much progress did we make, compared to where we began?”
Here’s the simple idea:
You pick a starting point and an ending point. Subtract the beginning value from the ending value to see how much things moved.
Then, instead of stopping there, you scale that change by the original value.
Growth rate is always expressed as a percentage. That means you can instantly spot if you’re growing, shrinking, or standing still. A positive rate means you’ve made progress. A negative rate signals a step back. And if the rate is zero, you’re exactly where you started.
At its core, growth rate turns raw data into a story about direction and speed, giving you a clear answer to “Are we moving fast enough?”
How do you calculate growth rate?
Calculating growth rate isn’t complicated. You just need to compare where you started with where you ended. The key is to measure both points over the same stretch of time, whether that’s a month, a quarter, or a full year.
Here’s how you do it, step by step:
- Choose your time frame.
Make sure you’re comparing the same type of period on both sides (like January to January, or Q1 to Q1.) - Find your starting value and your ending value.
These could be anything you’re tracking: revenue, website visits, customers – whatever matters to you. - Subtract the starting value from the ending value.
This gives you the raw change. - Divide that change by the starting value.
This scales the difference, so the result fits any business, big or small. - Convert to a percentage.
Multiply by 100, and you’ve got your growth rate.
Quick example:
Let’s say your sales went from 50,000 last year to 60,000 this year.
- Change: 60,000 – 50,000 = 10,000
- Scale: 10,000 ÷ 50,000 = 0.20
- Percentage: 0.20 × 100 = 20% growth
A positive rate means you’re moving forward. If the result is negative, you’re moving backward. If it’s zero, you’ve held steady.
That’s it. The growth rate formula is simple, but the insights can reshape your marketing goals and strategy.
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How to calculate growth rate in Excel or Google Sheets?
Spreadsheets make growth rate calculations painless. Whether you’re using Excel or Google Sheets, you can do it with a single formula. Just be sure to use the same time period for both values, monthly, yearly, or any interval you need.
In Excel:
Suppose your starting value is in cell B1 and your ending value is in B2.
Here’s the formula:
Excel formula: =(B2-B1)/B1
After you enter the formula, format the cell as Percentage for a clear result. If you leave it as a decimal, just multiply by 100.
In Google Sheets:
It works the exact same way. Type the same formula into your cell:
Google Sheets formula: =(B2-B1)/B1
Format as Percent for a clean, readable output.
If you’re working with spreadsheets regularly and want to keep your data organized, it helps to know a few basics, like merging cells for tidy headers or grouped data. You can learn how to merge cells in Google Sheets here.
Before you trust the answer, double-check your timeframes and values for consistency. It only takes one typo or mismatched month to throw off the story your numbers are telling.
Why does growth rate matter?
Growth rate isn’t just a reporting metric. It’s a decision-making tool. The number you calculate becomes a signal – are your efforts working, or are you standing still?
Let’s say your team spent months tweaking campaigns, building new features, or doubling down on customer support. The growth rate is how you check if those efforts are actually moving the needle. A positive rate shows momentum. A negative rate, even a small one, is an early warning that something’s off.
Let’s see why understanding and calculating growth rate is truly important:
1. It’s a true test of progress
You might feel like you’re improving, but the growth rate cuts through assumptions. It shows, in clear terms, if your results are actually getting better over time.
2. It levels the playing field
Comparing totals across different products or timeframes can be misleading. Growth rate turns everything into percentages, so you can compare performance fairly, no matter the size.
3. It reveals patterns early
By looking at your growth rate month after month, you’ll spot trends before they become problems. A drop in growth rate can signal a new competitor, a shift in the market, or something broken in your process – long before the headline numbers look alarming.
CAGR vs Simple Growth Rate
Not all growth rates tell the same story. Sometimes, you want to know how much something changed over one stretch, like a single year or a campaign cycle. Other times, you need to understand the average pace over several periods, especially if there were ups and downs along the way. That’s where CAGR comes in.
Simple Growth Rate: one period, one snapshot
Simple growth rate shows you the total percentage change between your starting and ending values for a single period. It’s direct, quick, and perfect when your data moves in a straight line.
Example:
Start with $50,000 in January, end with $60,000 in December. The growth rate is:
(60,000−50,000)÷50,000=0.20=20%
CAGR: The smoother story
Compound annual growth rate (CAGR) answers a bigger question: “If my growth had happened at a steady, compounded rate every year, what would that annual pace be?” CAGR evens out the roller coaster, so you can compare apples to apples, even if some years were better than others.
The formula for CAGR is:
Where n is the number of periods (usually years).
When to use simple growth rate or CAGR?
- Use simple growth rate for a one-time comparison or when changes are steady.
- Use CAGR when you want the annualized rate across multiple periods, smoothing out volatility.
What is Average Growth Rate (AAGR)?
Sometimes, you want a quick average of how much you’re growing each year, even if that growth hasn’t been consistent. Average annual growth rate (AAGR) does just that. It takes each year’s growth rate, adds them together, and divides by the number of years.
AAGR is straightforward, but there’s a catch: it ignores compounding. That means if you had a bumpy ride (some years up, some down) AAGR can paint a rosier picture than what actually happened.
How to calculate AAGR:
Add up all your individual annual growth rates, then divide by the number of years.
When does AAGR work well? Use it for a fast snapshot, but switch to CAGR when you need the true, compounded story. Especially if your growth hasn’t been steady year after year.
What do you mean by YoY vs MoM Growth Rate?
Growth rate isn’t just about what changed, it’s also about when it changed. Two of the most common ways to track this are year-over-year (YoY) and month-over-month (MoM) growth rates.
Year-over-Year (YoY): See the Bigger Picture
YoY compares the same period in different years, like this April to last April. It helps you filter out seasonality and see if you’re really outpacing last year’s efforts, not just riding short-term waves.
YoY growth (%) = ((Current period ÷ Same period last year) − 1) × 100
Month-over-Month (MoM): Track Immediate Shifts
MoM compares one month to the month before. This method is sensitive to changes, making it useful for spotting fast-moving trends or the impact of a campaign. But keep in mind, MoM can jump around – holidays, BFCM, seasonality, or a one-off event can swing it sharply.
MoM growth (%) = ((This month − Last month) ÷ Last month) × 100
Don’t forget to keep in mind:
- Use YoY when you want to understand real progress, stripped of seasonal spikes and dips.
- Use MoM when you need quick feedback on recent changes, product launches, or ad tests.
No matter which you pick, keep your periods consistent and your data clean. That’s how you get honest signals from your growth rates.
What is doubling time and the rule of 70?
One of the most practical questions in business is, “How long will it take to double?” Whether you’re talking about revenue, customers, or followers, this is where doubling time comes in.
The easiest way to estimate doubling time is with the Rule of 70. Just take the number 70 and divide it by your annual growth rate (as a percent).
Here’s the formula:
Example:
If you’re growing at 10% per year, doubling time is about 7 years (70 ÷ 10 = 7). This shortcut works best for steady, moderate growth rates – think between 2% and 20%.
Keep in mind, the Rule of 70 is a quick estimate, not a precise prediction. If your growth jumps around a lot, actual results may vary.
What are some common ways for businesses to measure growth?
Growth rate isn’t tied to just one metric. In practice, it can be used to track progress across almost every area of a business. That’s what makes it so powerful: you get a fair, apples-to-apples comparison across teams, products, or even entire companies.
Here are some of the places you’ll see growth rate used most often:
Revenue and Sales
This is the classic one. How much your top line has grown compared to last period? It gives you a sense of whether your business engine is getting stronger or slowing down.
Active Users or Customers
Whether it’s daily users on an app or new signups to your platform, growth rate makes it easy to see if you’re actually reaching more people over time. You can use tools like Google Analytics 4 to track active users on a website or app.
Recurring Revenue (MRR/ARR)
For SaaS or subscription businesses, measuring the growth rate of monthly recurring revenue (MRR) or annual recurring revenue (ARR) helps you track sustainable, predictable income.
Average Revenue per User (ARPU)
This looks at how much value you’re getting from each customer, showing whether you’re successfully upselling or increasing prices.
Churn (the flip side)
Even churn rate is a kind of growth rate, except it measures loss instead of gain. Keeping an eye on how quickly you’re losing users or revenue is just as important as tracking gains.
Market Share
Growth rate here shows how quickly you’re gaining ground on competitors, not just your own past results.
Every team might have its favourite metric, but growth rate ties them all together. It’s the common language of progress, no matter what you’re measuring.
👉 RELATED: If you’re running Meta Ads, here are some top metrics your team should be tracking.
How to improve growth rate?
Seeing your growth rate is only half the story. The real value comes from knowing how to make it better. No matter what you’re tracking (revenue, users, signups), improving your growth rate means figuring out where progress stalls and acting with purpose.
1. Diagnose the bottleneck
Start by breaking down your process. Are you not getting enough new leads? Is your sign-up flow confusing? Are customers dropping off too soon? Find the weakest link, not just the biggest number.
2. Test one change at a time
Once you spot the hurdle, run focused experiments. This might mean changing your pricing, refreshing your ad creative, tweaking your onboarding, or simply asking users for feedback. Track the growth rate before and after so you know what really works.
3. Build on what’s already working
When you find a tactic that actually moves the needle, double down. Maybe a referral campaign boosted signups, or a feature launch spiked engagement. Growth rate helps you spot these wins early, so you can shift your resources toward the things that actually fuel momentum.
The key is to treat growth rate as your early warning and early opportunity system. Don’t just chase bigger numbers. Use growth rate to find the smartest way forward.
FAQs related to Growth Rate
1. Can growth rate be negative?
Absolutely. If your ending value is less than your starting value, you’ll get a negative growth rate. This simply means you’ve shrunk over the period you’re measuring.
2. What’s the difference between growth rate and CAGR?
Growth rate is the percentage change over a single period, like one month or one year. CAGR (compound annual growth rate) shows the average yearly pace over multiple periods, smoothing out the ups and downs and factoring in compounding.
3. What’s a good growth rate for my business?
There’s no universal answer for what will be a good growth rate for your business. It depends on your industry, business stage, and goals. Startups often target double-digit monthly growth, while established companies may be happy with single-digit annual gains. The best benchmark is how you’re trending over time and compared to your closest competitors.
4. What is internal (or sustainable) growth rate?
Internal growth rate is a financial metric used to estimate how much a company can grow using only its own profits, without taking on new debt or outside investment. It’s mostly used in corporate finance.
5. How does churn rate relate to growth rate?
Churn is essentially negative growth. If your churn rate is higher than your new acquisition growth rate, your business is shrinking, even if you’re still signing up new users.
