How to Calculate Growth Rate per Year

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Annual Growth Rate Calculator

Compound Annual Growth Rate (CAGR):

How to Calculate Growth Rate Per Year

Calculating the growth rate per year is essential for businesses, investors, and analysts to understand the geometric progression of an investment or a metric over a specific time period. Unlike a simple average, the Compound Annual Growth Rate (CAGR) accounts for the effects of compounding, providing a more accurate representation of annual performance.

The Annual Growth Formula

To determine the annual growth rate (CAGR) manually, you use the following mathematical formula:

Formula: [(Ending Value / Beginning Value) ^ (1 / Number of Years)] – 1

After performing this calculation, multiply the result by 100 to convert it into a percentage.

Step-by-Step Calculation Example

Let's say you started a blog that had 1,000 monthly visitors in its first year. After 3 years, the blog grew to 5,000 monthly visitors. Here is how you calculate the growth rate per year:

  1. Identify Beginning Value: 1,000
  2. Identify Ending Value: 5,000
  3. Determine Time Period: 3 Years
  4. Divide Ending by Beginning: 5,000 / 1,000 = 5
  5. Raise to the Power of 1/n: 5 ^ (1 / 3) ≈ 1.7099
  6. Subtract 1: 1.7099 – 1 = 0.7099
  7. Convert to Percentage: 70.99%
Result: Your blog grew at a compound annual rate of 70.99% per year.

Why Annual Growth Matters

Using a "per year" metric allows you to compare different assets or business performances on an equal footing. For instance, comparing a 50% total growth over 5 years against a 20% total growth over 2 years is difficult without calculating the annual rate. The annual rate normalizes these figures so you can see which trend is truly stronger.

Common Use Cases

  • Revenue Growth: Assessing how fast a startup is scaling year-over-year.
  • Investment Portfolio: Evaluating the performance of stocks or mutual funds.
  • Population Dynamics: Tracking the growth rate of a city or demographic.
  • Website Traffic: Measuring the effectiveness of long-term SEO and marketing strategies.
function calculateAnnualGrowth() { var beginningValue = parseFloat(document.getElementById("initialValue").value); var endingValue = parseFloat(document.getElementById("finalValue").value); var years = parseFloat(document.getElementById("timePeriod").value); var resultBox = document.getElementById("growth-result-box"); var resultDisplay = document.getElementById("growthResultValue"); var descriptionDisplay = document.getElementById("growthDescription"); if (isNaN(beginningValue) || isNaN(endingValue) || isNaN(years) || years <= 0 || beginningValue <= 0) { alert("Please enter valid positive numbers. Beginning value and years must be greater than zero."); return; } // CAGR Formula: ((Ending / Beginning) ^ (1 / Years)) – 1 var growthRate = (Math.pow((endingValue / beginningValue), (1 / years)) – 1) * 100; resultDisplay.innerText = growthRate.toFixed(2) + "%"; var totalGrowth = ((endingValue – beginningValue) / beginningValue) * 100; descriptionDisplay.innerHTML = "Your total growth over " + years + " years was " + totalGrowth.toFixed(2) + "%, which averages out to a compounded " + growthRate.toFixed(2) + "% per year."; resultBox.style.display = "block"; resultBox.scrollIntoView({ behavior: 'smooth', block: 'nearest' }); }

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