How to calculate Growth Rates for your business
How fast is your business growing? Whether your business is growing or not is an important fact, but how fast it is growing can be hard to nail down. As we saw with our investigation of churn, it can be hard to even define a simple metric like growth and even harder to calculate it.
Your growth rate is an important metric for allocating your resources in the future. If your business grows faster than you can handle, you may find yourself stretched too thinly. If it grows too slowly, your business might not survive. What growth means to you will influence how you calculate your growth rate and how you use that metric.
Misleading positive growth rates can represent the dark side of data, making people think your business is growing faster that reality. Sometimes that is a result of purposeful deception, and sometimes is an honest mistake based on the complexity of calculating growth. The stakes are high, as most businesses are valued as much on their growth rate as their overall profitability.
This week we’ll delve into what makes growth rates hard to define and how you can make sure your growth rate metric is reliable. Specifically we will cover:
- Part 2 – Defining Growth
- Part 3 – Compound Growth Rates
- Part 4 – Seasonal Growth
- Part 5 – Predicting Growth
Tomorrow we will get started by defining what we mean by growth, and how we can measure it.