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Showing posts from March, 2013

Challenging CAGR as growth comparison metric

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As a business analyst you may be required to compare growths of different entities over several periods. Conventionally, one would think of percentage growth or CAGR (Compounded Annual Growth Rate) to compare growth rates. These are also the metrics your management is mostly familiar with. However, in many cases these metrics may not do a good job. Let us say you are in B2B industry and your boss asks you to identify the fastest growing customer in the last 6 months (or 6 years). At the outset, this question seems simple and straightforward. As you start working on this, you will  realize that this is not straight forward. This is very different from comparing your portfolio returns using CAGR or finding the fastest growing country. You cannot simply measure the percentage growth between the first month and the sixth month and use that for comparisons. The reason being, each of your partner could be from a different industry and could have different purchasing cycles. This will