How To Calculate Growth Rate (With Formulas and Examples)

By Indeed Editorial Team

Updated November 1, 2022

Published August 17, 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Whether you're evaluating your actions or setting targets for your career objectives, various metrics can help you measure and track growth. Growth rate measures improvement over time, and it's an important part of many career fields. Understanding how to calculate growth rates can help you track performance, plan and set goals, and make predictions or forecasts for your industry. In this article, we explain how to find growth rates using different methods, provide examples, and discuss tips for calculating growth rates effectively.

Read more: How To Calculate Growth Percentage (With Examples)

Methods to calculate growth rate

Here are three common methods for calculating growth rate:

Straight-line percent change method

The straight-line percent change method is a common way to find the value of improvement. It's useful when calculating simple growth rates. When using this method, the direction of change can affect your result, and it works best for positive changes. For instance, you can use it to measure the growth rate between 100 to 200, because this is a positive change. If you're interested in calculating the change between 200 to 100, you may use a different method.

This calculation also works best when measuring a single growth. If you're interested in comparing multiple growth rates, you might consider using a different calculation method.

Midpoint method

The mid-point method is another effective method for calculating growth rates. You can use this method to compare and analyze multiple growth rates because it uses the average change between the original and new values in calculations. This method also works well for both positive and negative changes. For example, the result of calculating the average change from 100 to 200 is 150. This is the same for calculating the average change from 200 to 100.

The average growth rate over time method

The average growth rate over time method is useful for calculating the growth rate and comparing results. This method helps track growth over a long period, which you may use to make predictions for the future. You can use it to see growth over two years or longer. This method involves calculating the average growth rate per year.

Related:

  • How to Use an Annualized Growth Rate Formula (With Examples)

  • Step-by-Step Guide on How to Calculate Difference

How to calculate growth rate using the straight-line percent change method

Follow these steps to calculate the growth rate using the straight-line percent change method:

1. Write the formula

Begin by writing the straight-line percent change formula. This equation requires you to know the original and new values of your interest variable. The formula involves dividing the absolute change by the original value.

Growth rate = absolute change / original value

2. Find the absolute change

The absolute change is the difference between the new value and the original value. For example, suppose the new value is 100, and the original value is 50. The absolute change is 100 minus 50, which equals 50. A positive difference shows growth.

Absolute change = new value - original value

3. Divide the absolute change by the original value

Following the straight-line percent change formula, divide the absolute change by the original value of the interest variable. The result is your growth rate. Your answer may be a whole number or contain decimals.

Growth rate = absolute change / original value

4. Convert your result to a percentage

Finally, convert the growth rate to a percentage to obtain the percentage growth rate. Do this by multiplying the growth rate by 100.

Percentage growth rate = growth rate x 100

Example using straight-line percent change method to calculate growth rate

Here is an example of a growth rate calculated by using the straight-line percent change method:

In 2010, the population of a city in New Brunswick was 200,000. Now, the city has a population of 300,000 people. A city planner calculating the growth rate might use the straight-line percent method to calculate the following:

Growth rate = absolute change / original value

  1. Absolute change is 300,000 minus 200,000. This equals 100,000.

  2. The growth rate is 100,000 divided by 200,000. This equals 0.5.

  3. The percentage growth rate is 0.5 multiplied by 100. This equals 50%

Related: What Is Exponential Growth and the Reason Why It Matters

How to calculate growth rate using the midpoint method

You can follow these steps to apply the midpoint method in finding the growth rate:

1. Write the formula

Start by writing the midpoint formula. This equation requires you to know the absolute change and average value of the interest variable. It involves dividing the absolute change by the average value.

Growth rate = absolute change / average value

2. Find the absolute change

The absolute change is the difference between your original and new values. When dealing with growth, subtracting these values typically gives a positive number. For example, suppose the original value is 100, and the new value is 200. The absolute change is 200 minus 100, which equals 100.

Absolute change = new value - original value

3. Calculate the average value

The average value is the midpoint. Calculate the average value by adding the new and original values. Then, divide the result by two.

4. Divide the absolute change by the average value

Following the midpoint formula, divide the absolute change by the average value of the interest variable. You may get a fraction or a whole number, depending on the extent of growth. The result you find is the growth rate.

Growth rate = absolute change / average value

5. Convert your result to a percentage

Finally, convert the growth rate into the percentage growth rate. Do this by multiplying the growth rate by 100.

Percentage growth change = growth change x 100

Related: A Guide to Calculating the Rate of Return (With Examples)

Example using midpoint method to calculate growth rate

Here's an example of a growth rate calculated using the midpoint method:

In 2010, the population of a city in Ontario was 200,000. Now, the city has a population of 300,000 people. A city planner might use the midpoint method to calculate growth rate in the following way:

Growth rate = absolute change / average value

  1. Absolute change is 300,000 minus 200,000. This equals 100,000.

  2. The average value is the sum of 300,000 plus 200,000 divided by two. This equals 250,000.

  3. The growth rate is 100,000 divided by 250,000. This equals 0.4.

  4. The percentage growth rate is 0.4 multiplied by 100. This equals 40%.

How to calculate the average growth rate over time

Follow these steps to find the average growth rate over time:

1. Write the formula

Start by entering the formula for the average growth rate over time. To do this you will need to know the original and new values. The number of years represented by "N" is also important for calculating the growth rate using this method.

Growth rate = (new value / original value) ^ 1/N - 1

2. Divide the new value by the original value

Next, divide the new value by the original value. Typically you will get a fraction or a whole number, depending on the difference between the values. Check that the values have the same unit before you divide them.

3. Multiply the division result to the 1/Nth power

Multiplying a number to a 1/Nth power means finding a value that you would multiply N times to get the number. For example, suppose you want to multiply 16 to the 1/2nd power. This means finding a value that you would multiply two times to get 16. In this case, the value is 4.

4. Subtract one from your answer

Next, subtract one from the answer obtained in the previous step to get the growth rate. You may get a fraction or a whole number.

5. Convert the growth rate to a percentage

Finally, multiply the growth rate by 100 to get the percentage growth rate. The result will typically be a value above zero. The result obtained is also per year.

Related: 5 Types of Benchmarking Examples (Plus How to Use Benchmarking)

Example of average growth rate calculated over regular intervals

Here is an example that shows how the average growth rate method in use:

In 2016, the population of a city in Manitoba was 200,000. Five years later, the city has a population of 300,000 people. The city planner can use the average growth rate method to calculate the growth rate in the following way:

Growth rate = (new value / original value) ^1/N - 1

  1. Divide 300,000 by 200,000. This equals 1.5.

  2. N is the number of years, which is five. Multiply 1.5 to the 1/5th power, which is 1.08447.

  3. The growth rate is 1.08447 minus one. This equals 0.08447.

  4. The percentage growth rate is 0.08447 multiplied by 100. This equals 8.44% per year over five years.

Related: What Is an Analysis of an Industry? (With Importance)

Tips to calculate growth rate

Consider using these tips when finding the growth rate:

Use a calculator

Growth rate calculations typically involve large numbers, fractions, or exponentials. Using a calculator can help you perform these calculations easily. You may also use an online growth-rate calculator or a spreadsheet package.

Show your calculations

Consider writing every value before you start your calculations. Having the values on a computer screen or paper helps you reference them easily. Also, show each step to help you increase your accuracy.

Review your calculations

After calculating the growth rate, check your work for accuracy. For example, confirm whether you subtracted the right values if you have negative results. Try not to approximate your results at the early stages to ensure you find an accurate growth rate.

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