How to Calculate Year-Over-Year Growth

Comparing your performance from this year to the same time last year is the best way to gauge how well you’re doing. It helps you see if you’re improving or not, considering seasonal changes. 

Use our Year-on-Year Calculator to easily measure these changes. You can even figure out past performance if you know the Year-on-Year change and this year’s results. 

Give it a try to understand this metric better!

What is YoY Growth?

Year-over-year (YOY) is a financial comparison method that evaluates two or more measurable events on a yearly basis. 

It allows marketers to compare results from one period with those of a comparable period in the previous year. 

Here are the key points about YOY growth:

• It provides insights into how a particular variable (such as revenue, profits, or other metrics) changes over an entire year rather than just on a weekly or monthly basis.
• YOY comparisons are popular for assessing a company’s financial performance.
• They help mitigate the impact of seasonality, which can influence most businesses.
• By comparing the same months in different years, YOY data allows accurate comparisons despite seasonal fluctuations in consumer behavior.

YoY Formula

To calculate YOY growth, compare a specific metric (e.g., revenue) for the current period with the corresponding period from the previous year.

The formula is straightforward: [ \text{YOY Growth} = \frac{\text{Current Year Metric} – \text{Previous Year Metric}}{\text{Previous Year Metric}} \times 100% ]

Example:

Suppose a company’s net revenues in Q1 2021 were $1,000,000, and in Q1 2020, they were $950,000.

The YOY growth would be: [ \text{YOY Growth} = \frac{1,000,000 – 950,000}{950,000} \times 100% = 5.26% ]

A positive YOY growth percentage indicates improvement. A negative percentage suggests a decline compared to the previous year.

How to Use the YoY Growth Calculator?

To calculate Year-Over-Year (YoY) growth for your business, follow these steps:

Understand YoY Growth

Year-over-year growth measures how well your business is performing this year compared to the same period in the previous year.

It provides a longer-term view of performance and eliminates the variability seen in month-over-month or quarter-over-quarter calculations.

You can apply YoY calculations to various metrics like revenue, profit, user acquisition, website traffic, and more.

Collect data for the metric you want to measure. This could be financial data from your income statement or balance sheet.

Ensure you have at least 12 months’ worth of data.

Decide on the time period for your YoY calculation. Most commonly, it compares monthly or quarterly performance.

The formula works as long as you have a full year’s data.

Our calculator estimates YoY growth using the following formula:

[ \text{YoY Growth} = \left( \frac{{\text{Value Current Year} – \text{Value Last Year}}}{{\text{Value Last Year}}} \right) \times 100 ] 

where:

• (\text{Value Current Year}) represents the metric’s value in the current time period.
• (\text{Value Last Year}) represents the metric’s value in the same period last year.

Let’s say your revenue this year is $500,000, and last year it was $400,000.

Applying the formula: [ \text{YoY Growth} = \left( \frac{{500,000 – 400,000}}{{400,000}} \right) \times 100 = 25% ]

Your revenue has grown by 25% compared to last year.

When Shouldn’t I Use Year-on-Year Calculations?

Year-on-Year (YoY) calculations are valuable for assessing business performance, but there are situations where they may not be the best choice/

Let’s explore them briefly.

YoY comparisons might not account for seasonal fluctuations. If your business experiences significant seasonality (e.g., holiday sales), consider using other metrics like quarter-over-quarter (QoQ) growth.

In rapidly evolving industries or during major business changes (e.g., mergers, acquisitions, startup launches), YoY comparisons may not capture the full picture.

In such cases, consider using month-over-month (MoM) or weekly growth rates.

Small Sample Sizes:

If your data sample is small, for example, you are a brand new startup, YoY calculations may be less meaningful due to limited historical data.

In this case, you want to explore alternative metrics or focus on shorter time frames.

YoY calculations can be sensitive to outliers or anomalies. A single exceptional event (e.g., a large one-time sale) can distort the comparison.

Consider using trimmed mean or median calculations to mitigate the impact of outliers.

If your business model significantly changes (e.g., shifting from B2B to B2C), YoY comparisons may not reflect the new reality.

Adjust your analysis to account for these shifts.

YoY calculations assume consistent calendar periods (e.g., comparing January 2023 to January 2022).

If your fiscal year or reporting periods change, YoY comparisons become less straightforward.

Remember that context matters, and choosing the right metrics based on your business’s unique characteristics and goals is essential. 

When Should I Use Year-on-Year Calculations?

You should consider using year-on-year calculations when you want to analyze and compare data trends over a longer period, typically from one year to the next. 

Here are some situations where year-on-year calculations can be beneficial:

Long-term performance analysis

Year-on-year comparisons help assess the overall performance of a business, product, or service over time. By comparing data from one year to the previous year, you can identify trends, patterns, and areas of improvement or decline.

Seasonal variations

Year-on-year comparisons are particularly useful for businesses affected by seasonal fluctuations. For example, retail businesses often experience higher sales during certain seasons or holidays. Analyzing year-on-year data allows you to understand the impact of seasonality on performance and plan accordingly.

Identifying growth or decline

Comparing performance metrics year-on-year helps track whether your business is growing or declining over time. Positive year-on-year growth indicates progress and success, while negative trends may signal issues that need to be addressed.

Budgeting and forecasting

Year-on-year calculations are essential for budgeting and forecasting purposes. They provide insights into historical performance, which can inform future budget allocations and revenue projections.

Benchmarking against industry trends

Year-on-year comparisons allow you to benchmark your performance against industry averages or competitors over time. This helps identify whether your business is keeping pace with industry trends or falling behind.

Overall, year-on-year calculations are valuable for gaining insights into long-term performance trends, understanding seasonality, assessing growth or decline, informing budgeting decisions, and benchmarking against industry standards.