Published 2026-02-01 · Last updated 2026-03-09 · Reviewed by Valzura Editorial Team
CAGR Calculator
Find the smooth annual growth rate behind any change in revenue or value.
The compound annual growth rate (CAGR) is the constant yearly rate at which a value would have to grow to get from its beginning amount to its ending amount over a given number of years. The formula is the ending value divided by the beginning value, raised to the power of one divided by the number of years, minus one. Because it smooths out year-to-year swings, it is the standard way to state the growth of revenue, profit, or an investment over multiple years.
Revenue, profit, or investment value at the start.
The same figure at the end of the period.
Length of the period between the two values.
Compound Annual Growth Rate
15.8%
The constant yearly rate that turns 500,000 into 900,000 over 4 years.
The CAGR formula, step by step
Divide the ending value by the beginning value to get the total growth multiple, raise it to the power of one over the number of years to spread that growth evenly, then subtract one to express it as a rate. The exponent is what makes the figure compound: it asks what single rate, applied year after year to a growing base, reproduces the ending value exactly. That is different from splitting the total gain into equal slices, which ignores the growing base and overstates the rate.
Using it as a revenue growth calculator
The most common business use is measuring top-line growth, which makes this tool double as a revenue growth calculator. Suppose revenue was 500,000 dollars four years ago and reached 900,000 dollars this year. The total growth is 80 percent, and the compound annual growth rate is about 15.8 percent, because 500,000 dollars compounding at 15.8 percent for four years lands at roughly 900,000 dollars. Quoting the 15.8 percent figure is far more informative to a buyer or lender than the raw 80 percent, since it is directly comparable across companies and time periods.
Where a smooth growth rate misleads
The measure only looks at two endpoints, so it hides everything in between. A business that grew steadily and one that collapsed then recovered can show identical rates, and cherry-picking a weak starting year inflates the figure. Check the year-by-year path before trusting the summary number. And when money moves in and out along the way, such as an investment with interim distributions, a two-point growth rate is the wrong tool; the internal rate of return calculator handles uneven cash flows properly.
Growth and what your business is worth
Growth is one of the strongest drivers of the multiple a buyer will pay. Two companies with identical profit can sell for very different prices when one has grown 15 percent a year and the other has been flat, because the buyer is purchasing next year's earnings, not last year's. Our breakdown of how valuation multiples work shows where the growth premium comes from, and there are proven ways to increase business value before you sell. To put a number on it, see what your business is worth today with your actual revenue and growth figures.
Frequently Asked Questions
What is a good CAGR for a small business?
Revenue growth of 5 to 10 percent a year is solid for an established small business, while 15 to 25 percent or more is considered fast growth. Context matters: a mature industry rewards steady single digits, while software buyers expect much higher rates. Sustained growth at any level is worth more to a buyer than an erratic spike.
How is CAGR different from average annual growth?
A simple average adds up each year's growth rate and divides by the number of years, which overstates growth when results swing. The compound annual growth rate accounts for compounding, so it reflects the actual path from start to finish. A business that grows 50 percent one year and falls 20 percent the next averages 15 percent, but its compound rate is about 9.5 percent.
Can CAGR be negative?
Yes. When the ending value is below the beginning value, the compound annual growth rate is negative and shows the constant yearly rate of decline. For example, a value that falls from 100,000 dollars to 81,000 dollars over two years has a compound annual growth rate of negative 10 percent.
How many years should I use to calculate CAGR?
Three to five years is the most common window because it smooths one-off events while staying relevant to current performance. Buyers and lenders reviewing a business typically examine three years of financials, so a three-year revenue growth rate is the figure most often quoted in a sale.
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