From Startup Fortune · · 1m 50s
How to calculate revenue doubling time startup founders skip
Startup founders skip revenue doubling time calculations until VCs ask.
In brief
Startup founders skip revenue doubling time calculations until VCs ask. Founders use monthly growth rates without calculating doubling time, risking misrepresentation of revenue growth potential. Originally reported by Startup Fortune.
What founders skip
Founders quote growth as a percentage but hide how fast revenue actually doubles.
The formula
Months to double equals natural log of 2 divided by natural log of one plus monthly growth rate.
The quick check
Divide 72 by monthly growth rate to estimate doubling time in months.
Why 72 not 69.3
72 splits evenly by 2 3 4 6 8 9 and 12 for mental arithmetic.
Growth rate accuracy
Use three months of net revenue with RRI function not best month or annual figure divided by 12.
Example calculation
Monthly revenue $30,000 to $37,800 in three months equals 8% monthly growth.
Growth impact
Halving monthly growth from 8% to 4% stretches doubling time from 9.0 to 17.7 months.
Long-term effect
After two years 8% monthly growth multiplies revenue by 6.3 versus 2.6 for 4%.
Rule of 72 drifts
At 20% monthly growth rule says 3.6 months but true figure is 3.8 months.
Units matter
Annual growth rates must not be divided by 12 to get monthly rates.
Paul Graham's benchmark
Y Combinator companies need 5% to 7% weekly growth for healthy doubling time.
What to say to investors
Lead with trailing three-month compound rate and doubling time for clarity.
Investor perspective
Doubling time stretches as revenue base grows, showing healthy growth trends.
What happens next
Founders should calculate doubling time using three months of net revenue data.
The short version
Founders use monthly growth rates without calculating doubling time, risking misrepresentation of revenue growth potential.
