Modeldrill

Revenue and costs Updated November 2026

Revenue growth and CAGR

Year over year growth = this year / last year - 1. Compound annual growth rate (CAGR) = (end value / start value)^(1 / number of years) - 1, where the number of years is the count of growth periods, not of data points. In Excel: =(end/start)^(1/n)-1 or =RRI(n, start, end).

Syntax

CAGR = (End / Start)^(1 / n) - 1;  Excel: =RRI(n, start, end)

Examples

Revenue 100 in year 0, 150 in year 3
=(150/100)^(1/3)-1

Result: 14.47%

=RRI(3, 100, 150) gives the same.

Year over year: 120 this year, 100 last year
=120/100-1

Result: 20.0%

Project next year from 150 at 5% growth
=150*(1+5%)

Result: 157.50

Common mistakes

  • Counting data points instead of periods: five annual values span four years of growth, so n = 4.
  • Averaging yearly growth rates: the arithmetic mean overstates compound growth; use CAGR.
  • Negative or zero start value: CAGR is undefined, so switch to absolute change or another base year.

Practice Revenue growth and CAGR

These drills check your answer on live data, free, no account needed.

  • Grow revenue from one assumptionRevenue for 2026 is in B5 and the yearly growth rate is in B2. In C5, write a formula that grows the prior year by the rate in B2. Then fill it right to F5 (drag the fill handle, or select C5:F5 and press Ctrl+R). Lock the rate with dollar signs so it stays put when the formula is copied.
  • Year over year growthSix years of actual revenue are in row 5. Fill row 6 with the growth over the prior year, starting in C6 and filling right to G6.
  • Price times volumeUnits sold are forecast in row 5 and the price per unit in row 6 (it already grows with B2). Build the revenue row: write B7 as units times price, then fill right to F7.

Questions

What is the difference between CAGR and average growth?

CAGR is the single constant rate that takes the start value to the end value with compounding. The average of annual rates ignores compounding and is higher when growth varies.

How do I forecast revenue with a growth rate in Excel?

Put the rate in one cell and use =previous_year*(1+$B$1), copying across. For a different rate per year, reference a rate row instead.

Related

  • COGS as a percent of revenueCOGS % = cost of goods sold / revenue, and forecast COGS = revenue x COGS %. How to compute the historical ratio, project it and link it to gross margin.
  • Gross marginGross margin = (revenue - COGS) / revenue. The formula, worked examples with exact percentages, the difference between margin and markup and common mistakes.
  • Operating leverageDegree of operating leverage = contribution margin / EBIT = % change in EBIT / % change in sales. An example where a 10% sales rise lifts EBIT 40%, and why.
  • EBITDA marginEBITDA margin = EBITDA / revenue, the share of each sales dollar left as operating profit before D&A. Formula, exact examples, what is a good margin, errors.

Previous: Gross marginNext: COGS as a percent of revenue