Growth is an essential aspect of understanding the performance of any business or investment over time. Calculating percentage growth year over year (YoY) helps put figures into context by comparing them from one period to another. This process determines the relative improvement or decline of a specific parameter during a certain time frame. In this article, we will walk you through how to calculate percentage growth YoY.

Step 1: Gather Your Data

To start calculating YoY percentage growth, you will need data for two consecutive years (or other time periods). This could be data on revenue, population, sales, website visits, or any other metric that interests you.

For example, let’s assume we want to calculate the YoY growth of a company’s annual revenue:

– Revenue in Year 1: $100,000

– Revenue in Year 2: $140,000

Step 2: Calculate the Absolute Growth

Next up is the calculation of absolute growth. In simple terms, it refers to the difference between the values from two consecutive years. Use the formula below to find absolute growth:

Absolute Growth = Value in Year 2 – Value in Year 1

In our example:

Absolute Growth = $140,000 – $100,000

Absolute Growth = $40,000

The company’s revenue has increased by $40,000 from Year 1 to Year 2.

Step 3: Calculate Percentage Growth YoY

Now that we have the absolute growth figured out, let’s proceed with calculating the percentage growth. The formula for this calculation can be expressed as:

Percentage Growth = (Absolute Growth / Value in Year 1) × 100

Using our example:

Percentage Growth = ($40,000 / $100,000) × 100

Percentage Growth = 0.4 × 100

Percentage Growth = 40%

So, the company’s revenue has grown by 40% from Year 1 to Year 2.

Step 4: Interpreting Your Results

You can apply this method to get YoY growth percentages for various metrics, as long as you have comparable data for consecutive periods. Keep in mind that a positive percentage growth denotes improvement, while a negative percentage growth implies a decline in performance.

It is essential to consider different factors and variables affecting the metrics when interpreting YoY growth percentages. While a high YoY percentage might indicate a promising trend, it may not necessarily translate into continued success in the years ahead. Similarly, a decline in YoY percentage should raise concerns, prompting further investigation into underlying issues and potential remedies.

In conclusion, calculating percentage growth YoY is an insightful tool for analyzing and understanding the progress of businesses, projects, or investments over time. As you compare data from different periods, you equip yourself with valuable information that can help make informed decisions and drive performance improvements.