How to Calculate Year Over Year (YOY) Growth W/ Examples

Ever wondered what goes into calculating year over year growth, why it’s advantageous to a small business, and how you can do it yourself? 

Well, this post is going to tackle all of that and more. 

Let’s begin with a little bit of a definition. 

What Is Year-Over-Year Growth (YOY)?

Year over year growth, also known as year on year growth or YOY, is a type of financial analysis that is used to compare the performance of metrics from one year to another within the same period. 

For instance, this annualized basis of comparison allows you to measure how your total revenue in the first quarter of this year compares to the revenue you earned in the same quarter last year. If you want to compare smaller periods, calculating year over year growth also works when comparing the same months, weeks, and even days between years. (This is not to be confused with either month over month or quarter over quarter comparisons which measure performance against the previous month or quarter instead of the same periods of the previous year.)

You can calculate more than just revenue, though. You can compare conversions, number of products sold, number of new customers acquired, and other metrics you want to measure over time. YOY allows you to see if your business has been going strong, is plateauing, or if it’s on a decline.

Why Is Year-Over-Year Growth Important for Small Businesses?

Accurately Calculate Growth Despite Seasonal Fluctuations

There are certain times of the year when a business typically earns more or less revenue per consumer based on their behavior. A common example is during Christmas time or around other national holidays. While this is true across most industries, there are some industry specific instances of seasonal fluctuations. 

Let’s take the cinema industry as an example. Most movies are released in the months of May and June, and the winter months of November and December. This means movie theaters and concession stands tend to make more money during these periods. So, if they were to compare April’s revenue to May’s, they would likely see an extreme improvement. However, this does not accurately reflect their earnings because May is the beginning of “movie season”. Calculating year over year growth accounts for this type of fluctuation. They would be comparing both months of May to see a more accurate view of their performance during that month over time. 

Provide Data for Investors 

The great thing about YOY growth calculations is you can see your long-term growth. Investors love to look at YOY comparison data. It’s very attractive in a performance report because it shows the trend of growth or change of performance across the years. This keeps your current investors in the know and it could also help earn you some extra funding for your business if they see a favorable pattern.  

Spot Trends and Find Ways to Capitalize 

Speaking of patterns, calculating year on year growth can also reveal certain trends, cyclical patterns, and opportunities to capitalize on certain consumer behaviors like buying patterns. 

Using the previous example, January and February are typically known as “dump months” where theaters drop movies that may not be the most popular, have the most marketing, or have the top actors. Fans know this, and as such, most are skeptical of going to see a movie during that time, which affects revenue for that month. Movie theaters can encourage more people to come to the theaters by creating New Year promo campaigns and releasing new flavors of popcorn, for example. Some even lean into the joke by using a slogan like “Dump Month Deals” and making an event out of it. 

That said, YOY growth allows you to know which months you underperform as a business and industry as a whole. With this data and the help of some industry research, you now have actionable insight. Then you can focus your efforts on creating strategies that bring in more revenue through advertising, discounts, new product launches, etc. 

Gauge Performance Against Industry Standards and Competitors 

If you have data on industry standard benchmarks and competitor performance data, you can use YOY to measure your growth against this. The industry standard gives you a goal to maintain consistency. With competitor data, you can analyze their revenue patterns and use that as extra motivation to think up ways to assimilate strategies that work and come up with new ones to get ahead. 

What is the Formula for YOY Growth?

We can express the formula for calculating YOY growth in two ways:

The first way is to divide the value of the current time period by the value of the previous time period and subtract 1, or:

YOY growth for a certain period = Value of the Current Time Period / Value of the Previous Time Period) – 1 

The second way allows you to represent the value as a percentage. Subtract the value of the previous time period from the value of the current time period and divide that by the value of the previous time period, then multiply that by a hundred, calculated as:

((Value of the Current Time Period – Value of the Previous Time Period) / Value of the Previous Time Period )) (x 100) 

How Do I Calculate YOY Growth?

Using the formulas above, you can calculate any growth metric you want to track that involves comparing two similar periods. We typically express these calculations in percentages. 

Step 1: Choose a Growth Metric to Track and Calculate

Make sure you have the data, such as financial statements for revenue and profit calculations or customer information if calculating conversions. 

Step 2: Determine your Timeframe

Keep your time periods the same, whether you are calculating quarter by quarter, month by month, etc. 

Step 3: Decide on Where to Input Data and Calculate

Some people end up calculating year over year growth in Excel. We do recommend this, and will teach you how to do it later.  

Step 4: Analyze Data

Spot trends, fluctuations, and patterns. This will give you a place to start diving deeper into areas you can improve. 

Year-Over-Year Growth Example

Our movie theater wants to know how many movie-goers (MGs) they had during the first two months of last year compared to the first two months of this year after implementing their “Dump Month Deals” campaign.

1. Number of MGs in Jan-Feb of Y1 = 1,500 MGs
2. Number of MGs in Jan-Feb of Y2 = 2,300 MGs
3. YOY Formula = (2,300 MGs-1,500 MGs) / 1,500 MGs = 0.53
4. Multiply by 100 and you get a YOY growth rate percentage of 53.3% 

They were able to bring in over 50% more people than last year. You can glean from this calculation that their campaign was moderately successful at bringing in more movie goers during the first two months of the year.

Can I Calculate YOY Growth in an Excel Spreadsheet? 

Calculating year over year growth in Excel is not only possible but also simple. This makes Excel a great tool to use. 

Here are the steps:

1.  Fill columns and fields with the appropriate data, whether comparisons of revenue or other metrics between, years, quarters, months, etc. 

2. Choose one of the formulas to input and replace the period values for the values in the rows. 

We will start with the second year since 2020 doesn’t have any month of comparison. Swap our formula (Value of the Current Time Period – Value of the Previous Time Period) / Value of the Previous Time Period) with “=(B3-B2)/B2” on the C3 cell. 

3. Click and drag on the plus sign at the corner of the C3 cell and press enter to apply it to all the years. Your spreadsheet should look something like this: 

4. To convert to percentage, simply navigate to Home > Numbers > Dropdown arrow > Percentage

5. This works with our other formulas as well. Simply input “=(B2/B1)-1” instead of “=(B3-B2)/B2”.

What is a Good YoY Growth Rate?

According to Geckoboard, most companies fall between a growth rate of 15% and 45%. It’s worth noting that your growth rate is industry specific. So, just because you might not fall within these percentages, it doesn’t necessarily mean your company isn’t doing well. 

For instance, a startup may not necessarily experience a substantial growth rate in profit for the first few years. Additionally, an established company that experiences a drop in growth rate isn’t necessarily doing poorly. They could simply be slowing down in growth, as all companies do eventually, and may be focused on improving other areas such as efficiency, customer lifetime value, securing long-term revenue streams and partnerships, etc. 

Calculating year over year growth is not a complete picture. You still need to perform a more comprehensive analysis to see which factors are contributing to or harming your growth rate factor. YOY can also help with other calculations, like annual growth rate.

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Interested in learning more? Schedule a call with our CEO, Nathan Hirsch.

And here’s some free resources:

• Monthly Finance Meeting Agenda
• 9 Steps to Master Your Ecommerce Bookkeeping Checklist
• The Ultimate Guide on Finding an Ecommerce Virtual Bookkeeping Service
• What Is a Profit and Loss Statement?
• How to Read & Interpret a Cash Flow Statement
• How to Read a Balance Sheet & Truly Understand It

Conclusion

As you can see, calculating year over year growth is both beneficial and easy to do yourself. Start tracking your growth and finding new opportunities to excel in your industry, beginning with an Excel spreadsheet.