What is Year-over-Year (YoY) Growth?
The Short Answer
Year-over-Year (YoY) Growth explained simply
Year-over-Year (YoY) Growth is a way to compare a business's performance from one year to the next. You look at a specific period, like a quarter or a month, and compare it to the same period in the previous year. This helps you see if the business is truly growing or if changes are just due to normal seasonal ups and downs.
Real-World Example
YoY Revenue Growth for a Retail Store
Let's say a retail store had $100,000 in revenue in Q1 2022 and $120,000 in revenue in Q1 2023.
To calculate YoY Growth:
($120,000 - $100,000) / $100,000 = 0.20 or 20%
This means the store experienced 20% YoY revenue growth.
Why this matters
YoY Growth is important because it gives a clear picture of a business's actual performance trends. It helps you ignore seasonal changes that can make monthly or quarterly comparisons misleading. This metric is key for understanding if a business is consistently improving, staying flat, or declining.
When looking at YoY growth, always consider the context. A high growth rate might be impressive, but if it's from a very small base, it might not be as significant as it seems. Look for consistent growth over several periods.
When looking at YoY growth, always consider the context. A high growth rate might be impressive, but if it's from a very small base, it might not be as significant as it seems. Look for consistent growth over several periods.
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