How to Calculate Compound Annual Growth Rate (CAGR) in Excel

Compound Annual Growth Rate (CAGR) measures the smoothed annual growth rate of an investment or business metric over multiple years, dampening the volatility of year-to-year swings.

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1. The Core CAGR Mathematical Formula

$$\text{CAGR} = \left( \frac{\text{Ending Value}}{\text{Beginning Value}} \right)^{\frac{1}{\text{Number of Years}}} - 1$$

=(Ending_Value / Beginning_Value)^(1 / Years) - 1

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2. The Built-in Excel Function: RRI

=RRI(Years, Beginning_Value, Ending_Value)

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3. Real-World Revenue Growth Model

Suppose a SaaS business grew from $1,200,000 in 2021 to $4,850,000 in 2026 (5 years):

Year (A)	Revenue (B)	Formula / Metric
2021 (Year 0)	$1,200,000	Start Value
2022	$1,650,000	+37.5%
2023	$2,200,000	+33.3%
2024	$3,100,000	+40.9%
2025	$3,900,000	+25.8%
2026 (Year 5)	$4,850,000	End Value

CAGR Calculation:

• Using Math: =(B7 / B2)^(1 / 5) - 1 $\rightarrow$ 32.22%
• Using RRI: =RRI(5, B2, B7) $\rightarrow$ 32.22%

The company grew at a compounded annual pace of 32.22% per year.