How to Calculate and Use (Year-Over-Year) YOY Growth

Yoy growth

Last Updated March 12, 2024

Understanding your business’s growth is crucial for making informed decisions and planning for the future. (Year-over-year) YOY growth is a valuable metric that compares your performance from one year to the next, showing how much your business has grown or declined. In this article, we’ll explain what Year-over-year growth is, how to calculate it, and why it’s important for small businesses.

Year-over-year growth is a financial metric used to evaluate the performance of a business over a specified period, typically comparing one year with the previous year. It helps you understand the trend of your business’s growth, whether it’s increasing, decreasing, or remaining stable.

  • How Do You Calculate It?

To calculate YOY growth, you need two data points: the value of the metric in the current year and the value of the same metric in the previous year. The formula for calculating YOY growth is as follows:

YOY Growth %=(Current Year Value−Previous Year Value/Previous Year Value)×100 

  • The Year-Over-Year Growth Formula

Let’s break down the formula with an example:

Suppose your revenue in 2022 was $500,000, and in 2021, it was $500,000. To calculate the Year-over-year revenue growth for 2022, you would use the formula:

YOY Revenue Growth %=(500,000−400,000/400,000)×100

YOY Revenue Growth %=(100,000/400,000)×100

YOY Revenue Growth %=0.25×100

YOY Revenue Growth %=25%

So, your YOY revenue growth for 2022 is 25%.

  • YoY Growth Examples

Revenue Growth

Revenue growth is a key indicator of a business’s financial health. Calculating Year-over-year revenue growth helps you understand how effectively your business is generating revenue over time.

Website Traffic Growth

For online businesses, website traffic is crucial. Calculating Year-over-year growth in website traffic helps you gauge the effectiveness of your marketing strategies and the overall performance of your website.

Daily net income growth

Tracking YOY growth in daily net income helps you understand your business’s profitability trends. It allows you to identify areas where you can cut costs or increase revenue.

  • Why is year-over-year growth important to small businesses?

It accounts for seasonality

YOY growth accounts for seasonality, helping you understand if the growth or decline in your business is due to seasonal factors or a more significant trend.

It gives you a long-term view of the performance

By comparing your performance year over year, you get a long-term view of your business’s growth trajectory. This helps you make more informed decisions about future investments and strategies.

  • Ready to dig deeper into your financial statements?

Calculating YOY growth is just one way to analyze your business’s performance. By digging deeper into your financial statements and using other financial metrics, you can gain a more comprehensive understanding of your business’s financial health.

  • Conclusion

In conclusion, YOY growth is a valuable metric for evaluating your business’s performance over time. By understanding how to calculate and use Year-over-year growth, you can make informed decisions to drive your business’s success.