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How to Calculate Business Growth Rate & How Polymer Does It

Knowing your business growth rate is crucial for measuring performance, bolstering investor attraction and confidence, and understanding market expansion feasibility. Read on to learn how to calculate your business growth rate.

How to Calculate Business Growth Rate & How Polymer Does It

To steer your company to success, you must learn how to calculate business growth rates.

Among other things, the metric is crucial for measuring business performance, bolstering investor attraction and confidence, and understanding market expansion feasibility.

Also, learning how to calculate your business growth rate equips you with crucial insights to navigate the complexities of scaling your operations.

If you’re unsure how to calculate your business growth rate, follow the instructions below.

Definition of business growth rate

Growth rate is generally the result of comparing values within a specific period to determine progress.

For example, you can compare revenue from a particular month in the current quarter or year to your revenue gained in the same month last quarter or year.

It helps you assess if there was growth between the periods and determine what to improve.

You can use a simple formula to calculate your business growth percentage.

You can also include an additional equation to measure your business’s average growth performance over several periods.

Business growth rate provides an overall picture of your company’s performance.

It helps you understand how fast your business is growing and if there are dips in your progress. It can also alert you to consistent negative trends in your business’s growth pattern, allowing you to act promptly.

Measuring growth rate can also benefit the following:

  • Small businesses and startups. Data shows that only 42% of small businesses meet their financing needs, making it crucial to have investors. Small businesses demonstrating growth are more likely to get grants from backers and investors. Crunching numbers can validate the investment and justify continuous financing.
  • Innovation companies. Showing promise through a business’s growth rate helps innovation companies secure future funding.
  • Businesses that want to expand. A growing business needs more resources, from funding to employees. It makes calculating business growth crucial to validate progress and determine which areas are lacking before committing to the expansion.

Ways to measure a business’s growth rate

Below are the common methods to measure your business’s growth rate.

Revenue growth

One of the most common indicators of business growth is revenue.

Revenue growth (in percentage) is the increase or decrease in your sales between two periods or over time.

You can calculate revenue growth quarterly, monthly, or annually (annual growth rate).

Calculating revenue growth helps you see negative and positive changes in your total revenue. It gives you more realistic insights into your business’s financial health and success.

User growth rate

User growth rate refers to the percentage of new customers your business gains monthly.

Tracking and calculating user growth rate is crucial since an upward trend indicates that your company is getting more customers and, in turn, more business and revenue.

High user growth rates can also mean that customers like your product. It can show that your sales and marketing efforts work.

A declining user growth rate can indicate potential gaps in your products, sales, marketing efforts, customer service, and other business aspects.

Market share growth

Another indicator of business growth is increasing market share.

Market share is the portion (percentage) of a market your company or product controls.

To calculate market share growth, compare your market share numbers across various periods.

For example, if your market share in January 2023 was 10% and reached 25% by January 2024, your current market share would be 15%.

To calculate the growth rate, divide the increase by your original market share and multiply it by 100:  

15% / 10% = 1.5 (100) = 150% market growth rate

How to calculate business growth rates

Calculating growth rates starts with this basic formula:

Total revenue growth = [ (Current revenue - Previous revenue in the same period) / (Previous revenue in the same period) ] X 100

The formula gives you a specific dollar amount difference with the total revenue change or growth showing as a percentage.

Follow these steps to apply the formula.

Step 1: Determine your parameters

Identify the specific growth rate you want to calculate and the revenue differences you wish to determine.

Then, gather and sort the data you need.

For instance, you’ll need your company's earning figures between quarters, months, or years to compare your company’s revenue for those periods.

Step 2: Subtract the previous from the current period revenue

Next, calculate the amount by subtracting the previous period's revenue from the current period's revenue.

For example, subtract your third-quarter revenue from your fourth-quarter revenue when calculating growth based on your company’s Q3 and Q4 earnings.

Step 3: Divide the amount by the previous period revenue

Divide the resulting amount (difference between current and previous period revenue) by the previous period revenue.

The result will be in decimal format.

Step 4: Multiply by 100

Multiply the resulting decimal number by 100 to convert it into a percentage.

The result is your growth rate.

Let’s put this into context with an example.

Suppose you want to compare your Q3 ($85,000) and Q4 ($125,000).

The formula looks like this:

Total revenue growth = [ (125,000 - 85,000) / (85,000) ] X 100 = 47.06%

Your company’s growth rate between Q3 and Q4 is 47%.

You can calculate this manually or use spreadsheet formulas and functions via tools such as Google Sheets.

You can modify the formula based on your variables and the growth rate you want to calculate.

How Polymer calculates a business’s growth rate

Manually calculating or setting spreadsheet formulas to determine your business’s growth rates is pretty straightforward.

However, these can take time and effort, especially when dealing with a huge dataset.

Plus, manual calculations are open to human error, leading to inaccurate results.

Business Intelligence (BI) software Polymer makes calculating business growth rates almost effortless.

You can pull your business data into Polymer with a few clicks via multiple built-in data connectors.

You can also create custom metrics in Polymer based on the growth rate you want to track and analyze from your data, such as your monthly sales.  

Polymer’s AI discovers insights in your data and instantly generates visualizations with a few clicks.

You can customize the visualizations or create new ones to show your business growth rates.

The best part is that Polymer can automatically calculate your growth rates for you, showing the data via stunning visualizations and dashboards.

You can also use the PolyAI feature to get suggestions, tips, and instant visualizations, making your ad hoc analysis, business growth calculation, and visualization easy.  

With Polymer, learning how to build an ecommerce dashboard that highlights your business growth rate is a breeze.

As one of the best dashboard software and BI solutions, Polymer gives you an overall view of your business’ growth without coding or in-depth technical skills.

Get accurate, helpful business insights easily

Calculating your business growth rate is vital for strategic planning and making informed decisions.

It’s an absolute must.

Use Polymer to calculate your business growth rate and gain a deeper understanding of your company’s trajectory.

The software’s precise analysis via AI-driven features allows you to track and visualize your business growth rates without manual calculations, a steep learning curve, or a complex setup.

Start your Polymer account to harness the power of BI without the BS.

Posted on
February 2, 2024
under Blog
February 2, 2024
Written by

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