Year over Year analysis provides valuable insights into the changes and trends in various metrics, such as revenue, sales, or profit, over a twelve-month period.
Knowing how to calculate YoY growth is a fundamental skill that allows you to evaluate the progress of a company.
In this comprehensive guide, we will walk you through what YoY growth is and the step-by-step tutorial for how to calculate Year over Year Growth in spreadsheet programs.
Table of Contents
How to Calculate YoY Growth
- Calculate the difference by subtracting the initial value 12 months before from the current month’s value.
- Divide the difference by the initial value.
- Multiply by 100 to get the percentage
What is YoY?
Year over year (YoY) is a business and finance phrase that compares the performance or growth of a certain statistic or indicator for a given time to the same period the previous year.
It is a method of studying trends and discovering patterns by measuring the change in a variable over a twelve-month period.
When examining Year over Year data, the values for the same measure are compared between two matching points in time, which are often at the end of successive years. This comparison gives information on the variable’s percentage change or growth rate during that time period.
YoY is often used in financial reports, economic assessments, and performance evaluations to assist in quantifying the relative success or failure of a firm, industry, or market.
For example, if a company’s revenue in June 2022 was $1 million and its revenue in June 2023 is $1.2 million, the Year over Year revenue growth rate would be 20% ($1.2 million – $1 million) / $1 million x 100%.
Year over Year comparisons are especially beneficial for removing seasonal influences since they compare data sets from the same time period in different years. This enables a more precise assessment of long-term trends, as well as the identification of patterns and forecasting of future performance.
How to Calculate YoY Growth (Step-by-Step)
Calculating Year over Year (YoY) growth involves comparing the change in a particular metric or value from one year to the next, expressed as a percentage.
YoY Growth = ((Current Year Value - Previous Year Value) / Previous Year Value) * 100
To break it down further:
- Current Year Value: The value you want to analyze for the current year.
- Previous Year Value: The value in the prior year.
This formula will give you the Year over Year growth in percentage.
Here’s a step-by-step example of how to calculate YoY growth:
- Determine the initial and final values. Usually, you choose the current month’s values and compare it to the values of the month 12 months prior. Let’s take the example of annual revenue for a company.
January 2022= $500,000 January 2023= $700,000
- Calculate the difference by subtracting the current year value from the previous year value.
$700,000 - $500,000 = $200,000
- Divide the difference by the initial value: Divide the difference calculated in step 2 by the initial value.
$200,000 / $500,000 = 0.4
- Multiply by 100 to get the percentage: Multiply the result from step 3 by 100 to express the YoY growth as a percentage.
0.4 * 100 = 40%
In this example, the YoY growth for the company’s annual revenue is 40%. This indicates that the revenue increased by 40% from the previous year to the current year.
You can also use a year over year growth calculator (like the one in our example below) to help you cross-check your calculations.
Our Template in Google Sheets or Excel
For this guide, we’ll be using our example sheet below:
You can make a copy of Our example spreadsheet for Google sheets or download it for Excel.
Related: Google Sheet Accounting Templates
How to Calculate Year over Year Growth in Excel or Google Sheets.
To calculate Year over Year (YoY) growth in Excel or Google Sheets, you can use the following steps:
- Open a new or existing spreadsheet in either Excel or Google Sheets.
- In the cell for YoY column, type the equals sign (=) and add open brackets’
- Select the cell with the value for the current year.
- Add a minus sign and select the cell with the value for the previous year.
- Close the bracket. Add a / and select the cell for the previous year to divide the results with the value for the previous year.
- Close the bracket and add *100 to convert it to a percentage.
- Click Enter and tick on the Autofill suggestion to copy the formula. You can also drag the formula to the rest of the column to copy it.
This formula calculates the YoY growth rate by subtracting the first year’s value from the second year’s value, dividing the result by the first year’s value, and then multiplying it by 100 to express it as a percentage.
Your values will have too many decimal points, so you can use the icon to decrease decimal places to reduce them and round off to the nearest 0.01.
If desired, you can format the cells containing the YoY growth rate as percentages or apply other formatting options like those below.
You can use the analysis to review the calculated YoY growth rates to understand the percentage change or growth of the metric from one year to the next. Positive growth rates indicate an increase, while negative growth rates represent a decrease.
The same formula works in Excel, and you can use the same steps as above:
Why is YoY Important for Companies?
A lot of companies use Year over Year analysis to help understand their progress. Year over Year analysis is important for companies for several reasons, including:
Assessment of the Organization’s Performance
YoY analysis allows companies to assess their performance over time. Companies compare metrics such as revenue, profit, or sales from one year to the next. With this, they can evaluate their growth or decline.
The analysis provides insights into whether the company is progressing, stagnating, or facing challenges. The results show the difference between the metrics in the span of a year so that companies can compare how they were before and currently.
Analysis of Trends
YoY analysis helps identify trends and patterns in a company’s performance. It enables companies to spot recurring seasonal fluctuations, cyclical patterns, or long-term growth trends.
With the analysis, they can view the changes in different months over the years and notice patterns in those changes. This information is crucial for decision-making, strategic planning, and resource allocation.
Compare Against Competitors
YoY analysis allows companies to compare their performance against competitors or industry standards.
If a company can access its competitor’s YoY analysis, it can compare it with its own. This gives them a better understanding of their market position and competitive advantage by comparing their YoY growth rates with others in the same sector. It helps identify areas where improvements can be made, or opportunities can be pursued.
Forecasting Future Performances
YoY analysis provides a basis for forecasting future performance. Their analysis can be recorded for several years, and by analyzing past YoY growth rates, they can find patterns that occur often.
With these patterns, companies can make informed projections and set realistic goals for the upcoming year. It assists in budgeting, resource planning, and determining sales, revenue, or market share targets.
Presentation to Stakeholders
YoY analysis is valuable for communicating a company’s performance to investors, stakeholders, and shareholders. It provides a concise and standardized way of presenting financial and operational information. YoY growth rates demonstrate the company’s ability to generate consistent returns, attract investors, and instill confidence in stakeholders.
Evaluate Strategy Effectiveness
YoY analysis helps companies evaluate the effectiveness of their strategies, initiatives, and marketing campaigns. By comparing the results of different periods, companies can measure the impact of specific actions or changes implemented over time. It assists in identifying successful strategies and areas that require improvement.
Frequently Asked Questions
What Is the Formula for Year over Year Growth?
The Formula for year over year growth is as follows:
YoY Growth = ((Current Year Value - Previous Year Value) / Previous Year Value) * 100
Current Year Value- value you want to analyze for the current year.
Previous Year Value- value for the previous year.
This formula gives you the YoY in a percentage format.
How Do You Calculate Year Over Year Growth in Excel?
To find the Year over year growth in Excel:
- Open a new or existing spreadsheet in Excel.
- In the cell for the YoY column, type the equals sign (=) and add 2 open brackets.
- Select they cell for the current year.
- Add a minus sign and select the cell for the previous year.
- Close the bracket. Add a / to dive and select the cell for the previous year.
- Close the bracket and add *100 to convert to a percentage.
- Click Enter and drag the formula to the rest of the column to copy it.
YoY growth analysis enables us to evaluate performance, identify patterns and trends. By now you’ve learned how to calculate Year over Year growth and how to do it in Excel or Google Sheets.
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