How to Calculate YOY Growth With Year on Year Growth Calculator
- Created: Apr 09, 2024
- 4 min
CEO
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 Growth 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!
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What is the YoY Growth Rate?
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 recent financial performance 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 and marketing objectives examples) 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.
Compounded Annual Growth Rate 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:
YOY Growth=Previous Year Metric/Current Year Metric−Previous Year Metric
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: YOY Growth= 1,000,000−950,000=50,000
950,000/50,000
0.0526×100=5.26%
A positive YOY growth percentage increase 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:
YoY Growth=(Value Last Year/Value Current Year−Value Last Year
where:
- Value Current Year represents the metric’s value in the current time period.
- 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: 500,000−400,000=100,000
400,000/100,000
0.25×100=25%
Your revenue has grown by 25% compared to last year.
When Not to Use Year-On-Year Calculator?
Year-on-Year (YoY) is great for measuring business performance but there are times when it’s not the best tool/
Let’s take a look.
YoY doesn’t account for seasonality. If your business is highly seasonal (e.g. holiday sales) use other metrics like quarter-over-quarter (QoQ) growth.
In fast changing industries or during major business changes (e.g. mergers, acquisitions, startup launches) YoY may not give the full picture.
In those cases use month-over-month (MoM) or weekly growth rates.
Small Sample Sizes
If your data sample is small, e.g. you’re a brand new startup, YoY may not be meaningful with limited historical data.
In that case use alternative metrics or focus on shorter time frames.
YoY calculations can be sensitive to outliers or anomalies. A single one-off event (e.g. a large one-time sale) can skew the comparison.
Use trimmed mean or median calculations to reduce the impact of outliers.
If your business model changes (e.g. from B2B to B2C) YoY may not reflect the new reality.
Adjust your analysis for those changes.
YoY calculations assume consistent calendar periods (e.g. January 2023 vs January 2022).
If your fiscal year or reporting periods change YoY becomes less straightforward.
Remember, context matters, and choosing the right metrics for your business is key.
When Should I Use Year-on-Year Calculations?
Use year-on-year when you want to look at data trends over a longer period, usually from one year to the next.
Here are some scenarios where year-on-year is useful:
Long term performance
Year-on-year comparisons help you see the overall performance of a business, product or service over time. By comparing data from one year to the previous year you can see trends, patterns and areas to improve or decline.
Seasonal fluctuations
Year-on-year is particularly useful for businesses with seasonal fluctuations. For example, retail businesses have higher sales during certain seasons or holidays. By looking at year-on-year data you can see the impact of seasonality on performance and plan for it.
Growth or decline
Comparing metrics year-on-year helps you see if your business is growing or declining over time. Positive year-on-year growth means you’re doing well, negative means you need to fix something.
Budgeting and forecasting
Year-on-year is important for budgeting and forecasting. It gives you insights into historical performance (initial and final value, for example) which can inform future budget allocations and revenue projections.
Benchmarking against industry
Year-on-year allows you to benchmark yourself against industry averages or competitors over time. So you can see if your business is keeping up with industry or falling behind.
In general year-on-year is useful for seeing long term performance trends, understanding seasonality, growth or decline, budgeting and benchmarking against industry.
