How Inc. 5000 Determines and Measures Growth- An In-Depth Look at Their Calculation Methodologies

How does Inc 5000 calculate growth?

The Inc 5000 list, an annual ranking of the fastest-growing private companies in the United States, is a highly respected benchmark for entrepreneurial success. The list, which has been published by Inc. magazine since 1982, evaluates companies based on their percentage revenue growth over a three-year period. But how exactly does Inc 5000 calculate this growth and what factors do they consider? Let’s dive into the methodology behind this prestigious ranking.

Defining the Timeframe

The first step in calculating growth for the Inc 5000 list is to define the specific timeframe. Companies are evaluated based on their percentage revenue growth from the year they were founded to the latest fiscal year for which financials are available. This typically spans a three-year period, though there may be exceptions depending on the company’s founding date.

Percentage Revenue Growth Formula

To determine the percentage revenue growth, Inc 5000 uses the following formula:

Percentage Revenue Growth = ((Current Year Revenue – Previous Year Revenue) / Previous Year Revenue) 100

This formula calculates the percentage increase in revenue from one year to the next. For the Inc 5000 list, companies must have demonstrated a significant increase in revenue over the three-year evaluation period to qualify for the ranking.

Meeting the Criteria

To make the Inc 5000 list, companies must meet several criteria, including:

1. Be a privately held company based in the United States.
2. Have generated at least $100,000 in revenue in the year prior to the evaluation.
3. Have had an annual revenue of at least $2 million in the most recent fiscal year.
4. Have demonstrated a minimum of 4% revenue growth over the three-year evaluation period.

Accounting for External Factors

Inc 5000 acknowledges that revenue growth can be influenced by external factors, such as market trends, economic conditions, and industry-specific challenges. While the ranking focuses on percentage revenue growth, it does not take into account these external factors. However, Inc 5000 does recognize that some industries may face unique challenges and adjusts their methodology accordingly to ensure a fair and accurate ranking.

Benefits of the Inc 5000 List

The Inc 5000 list offers numerous benefits to the companies that make the cut. It provides recognition and validation of their entrepreneurial success, as well as access to a network of peers and potential investors. Moreover, being featured on the list can help companies attract talent, secure partnerships, and gain credibility in the business community.

In conclusion, the Inc 5000 list is a valuable tool for evaluating the success of private companies based on their percentage revenue growth. By using a straightforward formula and considering specific criteria, Inc 5000 ensures that the ranking reflects the true potential and resilience of these companies. Aspiring entrepreneurs and established businesses alike can look to the Inc 5000 list as a benchmark for excellence and inspiration.