Revenue Growth Rate

What is Revenue Growth Rate?

Revenue Growth Rate is a measure of how much a company’s revenue or income has increased within a given timeframe. It’s usually calculated over a quarterly or annual basis. Closely related to other KPIs such as MRR and ARR, Revenue Growth Rate provides important insights about the pattern and trajectory of your business growth so you can make informed decisions about your company’s future.

Revenue Growth Rate is often used by startups. A relevant KPI for your sales and finance teams to monitor, it’s also of special interest for your C-suite executives.

Why is Revenue Growth Rate important?

Revenue Growth Rate is important for monitoring growth in the early stages of your startup, as it will allow you to understand your company’s general health at a pivotal stage of its development.

A high growth rate will also work wonders for your company’s valuation: if your new startup hits the ground running with this KPI, it will improve your company’s reputation dramatically, increasing its value among potential investors.

Finally, monitoring this KPI will allow you to identify the factors that are either promoting or inhibiting growth and development.

How to calculate Revenue Growth Rate

Calculate your Revenue Growth Rate by subtracting the previous period’s revenue (whether from quarter, month, or year) from the current period’s revenue. Divide by the previous period’s revenue, and multiply this result by 100 to obtain a percentage.

Best practices for Revenue Growth Rate

It’s important to note that Revenue Growth Rate is most relevant for startups, especially in their initial stages. For a well-managed new company, the Revenue Growth Rate will increase drastically, perhaps even exponentially, over the first few months.

However, this drastic growth rate will plateau over time and stabilize – so it’s important to be aware of this trend and plan accordingly. At this point, switching to other metrics, such as MRR and ARR, will become more useful. That said, at least in the early months, founders and investors alike can find value in viewing your company’s revenue growth to ascertain where it might lead in the future and forecast accordingly.

Other KPIs similar to Revenue Growth Rate include:

• New MRR
• ARR
• Sales Conversion Rate