Financial Formulas

Year-Over-Year Calculation

Learn how to calculate year-over-year growth and track your business's performance over time.

Year-over-year (YoY) growth compares a metric from one period to the same period the previous year, eliminating seasonal variations. Formula: YoY Growth = ((Current Period - Previous Period) ÷ Previous Period) × 100. For example, if revenue was $100k last year and $120k this year, YoY growth is 20%. It's the standard way to measure business growth and is used by lenders to assess business performance and loan repayment ability.

Year-Over-Year Growth Formula

YoY Growth = ((Current Period - Previous Period) ÷ Previous Period) × 100

This formula calculates the percentage change from one year to the next. Positive values indicate growth; negative values indicate decline.

Use our business loan calculator to estimate financing needs based on growth.

Year-Over-Year Calculation Examples

Example 1: Revenue Growth

• Revenue 2023: $200,000

• Revenue 2024: $250,000

YoY Growth = (($250,000 - $200,000) ÷ $200,000) × 100 = 25%

✓ Strong growth - Revenue increased 25% year-over-year

Example 2: Profit Decline

• Net Income 2023: $50,000

• Net Income 2024: $40,000

YoY Change = (($40,000 - $50,000) ÷ $50,000) × 100 = -20%

⚠ Profit declined 20% year-over-year - Investigate causes

Why Year-Over-Year Growth Matters

Eliminates Seasonality: Compares same periods, removing seasonal variations that can distort month-to-month comparisons.
Shows True Growth: Reveals whether your business is actually growing or just experiencing seasonal fluctuations.
Lender Assessment: Lenders use YoY growth to assess business health and loan repayment ability. Consistent growth improves approval chances.
Strategic Planning: Helps identify trends and plan for future growth or address declining performance.

What Growth Rates Mean

20%+ (Excellent)

Strong, rapid growth. Lenders view this very favorably. May indicate scaling opportunities or market expansion.

10-20% (Good)

Healthy, steady growth. Shows business is expanding and performing well. Lenders approve of this growth rate.

0-10% (Moderate)

Slow but positive growth. May be acceptable for mature businesses but could indicate stagnation for younger companies.

Negative (Concerning)

Declining performance. Lenders view this as a red flag. Investigate causes and develop a turnaround plan.

Calculating YoY for Different Periods

You can calculate YoY growth for any metric and time period:

• Revenue: Compare annual revenue from one year to the next

• Quarterly: Compare Q1 2024 to Q1 2023

• Monthly: Compare January 2024 to January 2023

• Profit: Compare net income year-over-year

• Customers: Compare customer count year-over-year

Frequently Asked Questions

What's a good year-over-year growth rate?

It depends on your industry and business stage. For small businesses, 10-20% YoY growth is considered good. Startups may aim for 50%+, while mature businesses may be happy with 5-10%. Compare to industry benchmarks.

Why use YoY instead of month-over-month?

YoY eliminates seasonal variations. A retail business may have 50% growth in December vs November, but that's seasonal, not true growth. Comparing December 2024 to December 2023 shows actual growth.

How do lenders use YoY growth?

Lenders check YoY revenue and profit growth to assess business health and loan repayment ability. Consistent positive growth improves approval chances and may get better rates. Learn about how to qualify for business loans.

What if I don't have a full year of data?

For new businesses, calculate growth from when you started. For example, if you've been in business 6 months, compare current month to 6 months ago. Once you have a full year, switch to YoY comparisons.

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