# How to Calculate Annual Growth Rate in Excel (5 Different Cases)

If you are involved in the business world, you know how important it is to learn about the **Annual Growth Rate** to analyze the progress of a company’s market plans. This blog will show you **5 different cases** regarding how to calculate the annual growth rate in Excel.

**The annual Growth Rate** can be calculated using two methods. The first one is the **Average Growth Rate (**also known as** Simple Growth Rate **or **Yearly Growth Rate). **And the second one is the **Compound Average Growth Rate (CAGR)**. Microsoft Excel has lessened your workload with some amazing formulas to calculate the **Annual Average Growth Rate (AAGR)** and **Compound Average Growth Rate (CAGR)**.

Table of Contents

## Introduction to the Dataset

I am going to use a sales record (**column B: Sales**) of a business startup from the year 1990 to 2002 (**column A: Year**). The **AAGR** is in **column C**.

## What is Average Annual Growth Rate (AAGR) or Simple Growth Rate?

It is the average increase of the return of a revenue stream or investment of a company, in a given period.

To give you an example let’s say you have a small business of bakery items and your AAGR for the last 3 years is 25%. So that means your business has earned a 25% profit in these 3 years from what you have invested at the beginning of your bakery shop. But that does not mean that your business grows with 25% returns each year. It is the average growth of the last 3 years.

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## A. Average Annual Growth Rate (AAGR)

### Case #1: Average Annual Growth Rate (AAGR) for One Year

To determine the **average annual growth rate**, first, find out the difference between the **starting value** and the **final value**. And then, fractionate the outcome with the **starting value**. Easy right?

Basic Formula of **Average Annual Growth Rate (AAGR)**:

To calculate **AAGR **in Excel you can use one of these formulas:

=(Ending Value - Starting Value)/Starting Value

Or,

=(Ending Value/Starting Value)-1

Either way is correct. I will use the first formula to show you the method.

**Now Follow The Guide ↓ **

**Step_1: **Write this formula in cell **C3**:

**=(B3-B2)/B2**

**Formula Explanation**

**B3 **is the ending value and **B2 **is the starting value. The difference is then divided by cell **B2**. We haven’t applied the formula of the **AAGR **in cell **C2**. It’s because for cell **C2**, the ending value would be **B2 **and but the starting value would be **zero**.

**Step_2: **Press **ENTER**.

**Step_3: **Copy down the formula using the **Fill Handle.**

The result is in decimal form. Normally, **AAGR **is represented in the percentage form. So now change the decimal to a percentage.

**Step_4: **Click on the** Home** tab.

**Step_5: **From the **Number **group, select the ‘**%**’ option.

**Final Result ↓ **

Now you have the **AAGR **of 1990 to 2002. If you want to find out the **AAGR **per year of a company, this is the best way to do it.

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### Case #2: Average Annual Growth Rate (AAGR) for a Given Time Frame

In the previous technique, I showed you how you can calculate the **AAGR **per year. But it was not for a given time frame. Now for instance, if you want to calculate the **AAGR **for 1990-1995 or 1990-2002, you will need to use the **LN function**.

The formula with **LN function** for Annual Average Growth Rate:

Here,

**T**is the number of years we are calculating an increase or decrease.**Ln**is the natural log with a base e.- The
**Ending Value**is the final value of the given duration. - The
**Starting Value**is the initial investment.

I am going to calculate the **AAGR **for 1990-1995.

**Now Follow The Guide ↓ **

**Step_1: **Type this formula in an empty cell:

**=(1/5)*LN(B7/B2)**

I used cell **C7 **as it is corresponding to cell **A7 **of the year 1995.

**Formula Explanation**

**1/5** is the **1/T** in this formula. The Ending Value is **B7**. The Starting Value is **B2**.

**Step_2: **Press **ENTER**.

**Final Result ↓ **

Here you get the final result for 1990-1995.

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### Case #3: Calculate Average Growth Rate (AGR) in Excel

When you are done with determining the **AAGR**s, you can also calculate the **Average Growth Rate (AGR)** from the results. We will be using the **AVERAGE function** to find out the **AGR**.

**Now Follow The Guide ↓**

**Step_1: **Choose an empty cell beside the data table and type this formula:

**=AVERAGE(C3:C14)**

I chose cell **D8 **because it is the middle position of **column D**.

**Step_2: **Then press **ENTER**.

**Final Result ↓ **

Determining the **AGR** from the **AAGR** is a bit rare case. But it is important to know all the methods.

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## B. Compound Annual Growth Rate (CAGR)

### Case #4: Calculate Compound Annual Growth Rate (CAGR) in Excel

You must be thinking about what **CAGR** is used for. **CAGR** is used to calculate the compounded returns from your annual investments. But it does not count your company’s return individually.

The formula of **CAGR **may look a little complex at first. But if I break down its explanation, it will seem understandable to you.

To calculate the **CAGR**, first, fractionate the **Ending Value** by the **Starting Value (Ending Value/Starting Value)**. Secondly, choose the time period. Then, fractionate **1** by **time (1/Time)**. After that, take the **Ending Value/Starting Value **and rise it to the power **1/Time**. Then finally, minus **1** from the outcome.

If we write the formula mathematically:

To calculate** CAGR** in Excel, use this formula:

=(Ending Value/Starting Value)^(1/Time)-1

**Now Follow The Guide ↓**

**Step_1:** Write this formula in an empty cell:

**=(B14/B2)^(1/12)-1**

**Formula Explanation **

**B14**is the final value and**B2**is the starting value.**12**is the given time period. It is counted as: (**Total number of cells in the ‘Year’ column – 1**).

**Step_2: **Press **ENTER**.

**Step_3: **Change the decimal into percentage using the **Home **tab >>> **Number **group >>> **% **option.

**Final Result ↓ **

Done. You get your desired **CAGR **value.

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### Case #5: Get Compound Annual Growth Rate (CAGR) in Excel Using RRI Function

It’s an alternative method to calculate the **CAGR **using the **IRR function**.

**Now Follow The Guide ↓ **

**Step_1: **Copy this formula in an empty cell:

**=RRI(12,B2,B14)**

**Step_2: **Press **ENTER**.

**Final Result ↓ **

Please remember to count the time period for this technique like the previous methods. And here is the final result:

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## Conclusion

I hope the methods I have shown you will help you solve all annual growth rate-related problems. If you can’t remember the formulas, keep practicing them often. Feel free to tell us if you find our articles helpful. Have a good day!