Free tool
Growth Rate Calculator (CAGR)
Going from 1.2 to 1.8 million in three years is +50 %, but not +16.67 % a year. The compound annual growth rate takes compounding into account: each year grows on an already higher base.
Growth rate measures how a value changes from one period to another: (end value − start value) ÷ start value × 100. The compound annual growth rate (CAGR) turns that change into a yearly pace, allowing for compounding: the nth root of the ratio between the two values, n being the number of years, minus 1.
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How the two rates are calculated
Growth rate = (End − Start) ÷ Start × 100 CAGR = (End ÷ Start)^(1 ÷ Years) − 1
From 1,200,000 € to 1,800,000 € in 3 years, growth is 50 % and CAGR is 14.47 % a year. At the same pace, the following year would reach 2,060,486 €.
Dividing 50 % by three would give 16.67 % a year and overstate the pace: 1,200,000 € growing by 16.67 % every year makes 1,905,000 € after three years, not 1,800,000 €. CAGR is the only rate that, applied every year, lands exactly on the end value.
What the calculation lets you do
- Compare periods of different lengths, three years on one side and five on the other, on the same yearly pace.
- Project a target: yesterday’s CAGR is the starting point of a realistic growth plan.
Frequently asked questions
How do I calculate a growth rate?
Subtract the start value from the end value, divide by the start value, then multiply by 100. From 1,200,000 € to 1,800,000 €: 600,000 ÷ 1,200,000 × 100 = 50 %.
How do I calculate CAGR?
Divide the end value by the start value, raise the result to the power 1 ÷ number of years, then subtract 1. (1,800,000 ÷ 1,200,000)^(1 ÷ 3) − 1 = 14.47 % a year.
Why not divide growth by the number of years?
Because each year grows on a higher base than the one before. The simple average overstates the pace; CAGR is the only one that lands on the end value.
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