How to Calculate Revenue Growth for 3 Years
Original post by C. Taylor of Demand Media
Projecting your anticipated revenue into the future calculates the expected growth of the company. The most difficult task when projecting three years of revenue growth is knowing the current growth rate. However, this dilemma is solved by using past growth rates. If you have the current and last year's balance sheets for a company, calculating the historic growth rate requires only simple division. Armed with this historic growth rate, you can project the revenues three years into the future.
Divide the current year's total revenue from last year's total revenue. This gives you the revenue growth rate. For example, if the company earned $300,000 in revenue this year, and earned $275,000 last year, then the growth rate is 1.091.
Cube this number to calculate the growth rate three years from now. In the example, 1.091 raised to the power of three gives you a three-year growth rate of 1.299.
Multiply this growth rate by the current total revenue. In the example, the expected total revenue 3 years from now would be $389,700.
Subtract the current total revenue from this figure to calculate how much of that figure is growth. In the example, revenue three years from now is expected to increase by $89,700.
About the Author
C. Taylor has been a professional writer since 2009. He has written for online publications and the "Journal of Asian Martial Arts." Taylor specializes in martial arts, traveling, sciences and computer repair. He received a Master of Science in wildlife biology from Clemson University and a Bachelor of Arts in biological sciences from the College of Charleston.