LeoGlossary: Growth Rate
Rate at which any given variable has or is expected to grow over a specific period of time. Different industries consider different benchmark rates for growth. The most common growth rate measures the percentage increase in value of a variable – a country’s economy or company’s earnings- has increased over one year.
This can apply to revenues, earnings, users, or customers.
How To Calculate
The formula is as follows:
[ (Vcurrent - Vprevious) / Vprevious ] x 100 = Growth rate
V = Value
The previous value is subtracted from the current value. The difference is divided by the previous value which is them multiplied by 100.
That will provide the growth rate.
Business Growth Areas
Businesses are very interested in varying growth rates.
Here is a sampling:
- revenue
- sales
- profits
- customer retention
- lead generation
- lead conversion
- daily active users
- monthly active users
Economic Growth
Countries want to see the economy growing. The totality of activities of businesses end up comprising the overall economy.
The metric most utilized is gross domestic product (GDP).
An economy has different sectors that typically are focused upon:
- Primary : fishing, extraction of raw materials, agriculture
- Secondary : manufacturing of finished goods, construction, utilities
- Service : retail, banks, IT, finance
- Quaternary : knowledge and education
We can see how each sector feeds into the others. Growth rates in each area has an expanding impact upon the entire economy.
A country's GDP tends to be expressed as a growth rate over the previous period.
Intervals
Growth rates are on varying intervals.
In business, most look at year-over-year (YoY). This compares the change over the 12 month period of time. For most public companies, the data compiled over the period of a quarter.
There are times where rates are compared on a quarterly basis, known as quarter-over-quarter (QoQ).
Finally, some metrics are on a monthly basis.
General:
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