CAGR Calculator
Growing 12.47% every year for 4 years turns $250,000.00 into $400,000.00. Actual years may have been higher or lower.
How the CAGR calculation works
CAGR = (ending value ÷ beginning value)^(1 ÷ years) − 1
Revenue that grew from $250,000 to $400,000 in 4 years has a CAGR of (1.6)^0.25 − 1 = 12.47%.
Count the gaps between years, not the years listed
From the end of 2021 to the end of 2025 is 4 years, not 5. Partial years work too, e.g. 2.5.
CAGR smooths out the ups and downs
It is the single rate that gives the same result if growth had been even every year. The yearly path below shows that smooth line.
Total growth is not the same as yearly growth
60% total growth over 4 years is 12.47% a year, not 15%, because each year's growth builds on the last.
Worked example. A bakery's revenue grew from $250,000 to $400,000 over 4 years. That is 60% total growth and a CAGR of 12.47%: about $281,171 after year 1, $316,228 after year 2 and $355,656 after year 3.
CAGR FAQ
What is CAGR?
CAGR (compound annual growth rate) is the single yearly rate that would take a starting value to an ending value if growth were the same every year. It is used for revenue, customers, profit or an investment's value over several years.
What is the CAGR formula?
CAGR = (ending value ÷ beginning value)^(1 ÷ number of years) − 1. Multiply by 100 for a percentage.
How do I calculate CAGR?
Divide the ending value by the beginning value, raise the result to the power of 1 ÷ years, then subtract 1. For $250,000 to $400,000 over 4 years: 400,000 ÷ 250,000 = 1.6; 1.6^0.25 = 1.1247; minus 1 = 12.47%. For months, divide by 12 first: 30 months is 2.5 years, which gives 20.68% for the same values.
How do I calculate CAGR in Excel?
Use =(end/start)^(1/years)-1, or the built-in =RRI(years, start, end). With start in B1, end in B2 and years in B3: =(B2/B1)^(1/B3)-1.
What is a good CAGR?
There is no single good number. It depends on what you measure, the industry and the business's age, and a young business usually grows faster from a small base. Compare against your own past years, your industry and inflation; growth below inflation means shrinking in real terms.
What is the difference between CAGR and average annual growth?
Average growth adds up each year's percentage and divides. CAGR compounds, so it ignores volatility and gives the rate that connects the start and end values. CAGR is never higher than the average. Example: +50% then −20% averages 15% a year, but the CAGR is 9.54%, because $100 only grew to $120.
Can CAGR be negative?
Yes. If the ending value is below the beginning value, the CAGR is negative. A fall from $400,000 to $250,000 over 4 years is −11.09% a year.