Content

• To step
• Part 1 of 2: Calculating a growth factor
• Part 2 of 2: Calculating the average growth factor over regular time intervals
• Tips

To many readers, "calculating a growth factor" sounds like an intimidating mathematical process. In reality, calculating the growth factor is very simple. A growth factor is simply the difference between two values, referred to as a percentage of the first value. In this article, we'll explain the basic method and show you some more complicated ways to measure growth.

To step

Part 1 of 2: Calculating a growth factor

1. Obtain data showing change over time. All you need to calculate a growth factor are two numbers - one that indicates the starting value and one that indicates the ending value. Suppose your business was worth $ 1,000 at the beginning of the month and it is now worth $ 1,200 at the end of the month. Then you can calculate the growth factor with 1000 as the starting value (the previous value) and 1200 as the end value (the current value). Let's solve a simple example sum. In this case, we'll use the numbers 205 (previous value) and 310 (current value).
   • If the numbers are the same, there is no growth - the growth factor is 0.
2. Apply the formula for calculating the growth factor. Enter the values ​​in the following formula: (current) - (previous) / (previous). The answer will be a fraction. Convert the fraction to a decimal value.
   • In our example, 310 was the current value and 205 was the previous value. So the formula looks like this with these values: (310 - 205)/205 = 105/205 = 0,51
3. Convert the solution to percentages. Usually a growth factor is shown as a percentage. To convert the decimal solution, we multiply the number by one hundred and add the percent sign. A percentage is an easy-to-understand way of indicating the change between two values.
   • So in our example, we multiply 0.51 by 100 and then we add a percent sign. 0.51 x 100 = 51%.
   • So our growth factor is 51%. In other words, the current value is 51% greater than the previous value. If the present value had been less than the previous value, the growth factor would have been negative.

Part 2 of 2: Calculating the average growth factor over regular time intervals

1. Organize your data in a table. This is not necessary, but it can be useful, because that way you can view the data as a series of values ​​over a certain period of time. For this purpose you can set up a simple table - create two columns, placing the values ​​of the time in the left column and the values ​​of the quantity in the right column.
2. Use a growth factor equation that takes into account the number of time intervals in your data. Your data must contain regular intervals, and each value must have a corresponding quantity value. The units of time are not important - the method works for data collected over a span of seconds, minutes, days and so on. In our case, the data is expressed in years. Enter your previous and current values ​​in a new formula: (current) = (previous) * (1+ growth factor), where n stands for number of time periods.
   • Using this method, we calculate the average growth factor for each time interval, assuming that growth is increasing proportionally. Because we use years in our example, we obtain an average annual growth factor.
3. Isolate the growth factor variable. Edit the equation until only the growth rate is on one side of the equation. To do this, we divide both sides by the previous value, take the exponent of 1 / n, and then subtract 1.
   • You should now get: growth factor = (current / previous) - 1.
4. Solve to calculate the growth factor. Enter the values ​​for previous and current, and replace n with the number of time intervals of your data, including previous and current values. Solve according to the mathematical principles.
   • In our example we use 310 as the present value and 205 as the previous value, for the period we take 10 years for n. In this case, then is the average annual growth factor (310/205) - 1 = 0,0422
   • 0.0422 x 100 = 4.22%. On average, the value has risen 4.22 percent per year.

Tips

• This works both ways. Use the same formula if the numbers are going up or down. We are talking about a slowdown in growth when the numbers fall.
• The complete formula for calculating a growth rate is as follows: (current - previous) / previous) * 100