Find Your Blog’s Compound Growth Rate
by Brian Lee. (Visited 5055 times) (6 comments) :: Print This Post
Posted: April 4th, 2007 under Blogging, Investing.
This article is for any blogger, entrepreneur, or investor who is serious about analyzing their investment.
One of the most important factors of any investment is its growth rate, but calculating it can be difficult. It’s not as easy as comparing one period of production to the next. It’s important to find a sustained pattern of growth over a period of time so that you are not fooled by short-term anomalies.
If you are a blogger or small business owner, finding your compound growth rate can help you project where your business is going. It can provide necessary feedback to keep you working through what may seem like fruitless times.
When your investment compounds over time, it benefits from one of the most powerful wealth building tools in the universe: exponential growth.
Here’s the formula:
Compound Growth Rate = ((FV/PV)^1/n) - 1
FV = Future Value
PV = Present Value
n = Number of periods
Since it isn’t easy to do on the fly, I’ve included a spreadsheet that will calculate it for you. Download it here.
Genius Types’ Compound Monthly Growth Rate
I’ll use the monthly growth rate of Genius Types as an example. Here is a list of unique visitors to Genius Types over the last five months.
Unique Visitors
2,423 November
2,709 December
5,434 January
7,273 February
10,314 March
To figure the compound monthly growth rate, we plug the data into our formula:
((10,314/2,423)^1/4) - 1 = 44%
I use March’s total for the Future Value and November’s for the Present value. “n” in this case is 4 because even though we are referencing five months, the total amount of time between them is 4 months. Don’t make the mistake of counting your first period, it’s just a starting point.
According to these calculations, Genius Types is growing at the compound rate of 44% per month. Now, here’s the fun part! We can project where Genius Types will be in a year if this rate continues.
In the spreadsheet (download it here), there is an area where you can plug in the results from your most recent period and your projected growth rate and see where your data will be twelve periods from now.
According to the spreadsheet, this Genius Types is projected to attract 569,396 visitors in March of next year!
The question will be whether or not I can sustain 44% growth month over month. In most business models, the growth rate slows as the business grows. It will be interesting to see if that applies to blogging.
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