Compounding makes an assumption visible.
A compound projection repeatedly applies the same growth factor to the remaining quantity. It is useful for understanding the implication of an assumption, including how quickly a modest rate compounds over time.
A constant rate is rarely a credible long-term forecast. Market capacity, churn, seasonality and operating constraints eventually change the trajectory. Treat the projection as a scenario to challenge with evidence.
The formula, made clear.
- Per-period growth
- A decimal factor matching the chosen time interval.
- Periods
- A whole number of consistent intervals; zero returns the starting quantity.
Put the numbers in context.
1,000 units growing 5% each period reach about 3,225.10 units after 24 periods. This is 2,225.10 additional units.
| Input | Example value |
|---|---|
| Starting quantity | 1,000 units |
| Growth per period | 5% |
| Number of periods | 24 periods |
| Projected quantity | 3,225.1 |
What this calculation assumes
Constant compound growth with no additions outside the growth factor, no market ceiling and no capacity constraints. Negative growth down to −100% is allowed. Fractional projected customer counts represent expected values.
What to consider next.
Compare the implied customer base with the serviceable market and the hiring required to deliver it.
How we approach financial models →