A Guide to Percentage Increase and Decrease in Business
"Sales grew 20%" and "sales fell 20% then grew 20%" sound like they should cancel out — they don't, and understanding why is the key to reading percentage changes correctly in any business context.
The correct formula
Percentage change = (New value − Old value) ÷ Old value × 100
The denominator is always the original (old) value, not the new one — this is the detail that trips people up most often when working backward from a percentage.
Why a 20% drop and a 20% rise don't cancel out
Start with 100. A 20% decrease brings it to 80. A subsequent 20% increase applies to the new base of 80, not the original 100 — giving 96, not back to 100. Percentage changes are always relative to whatever the current value is at that moment, which is why sequential percentage changes compound rather than simply adding or subtracting.
A common business reporting mistake
| Scenario | Correct calculation |
|---|---|
| Revenue: $80k → $100k | (100-80)/80 × 100 = 25% increase |
| Revenue: $100k → $80k | (80-100)/100 × 100 = 20% decrease |
Notice the asymmetry: going from 80k to 100k is a 25% increase, but going back from 100k to 80k is only a 20% decrease — because the base changed. This asymmetry catches people comparing year-over-year figures in both directions.
Practical takeaway
Always double-check which number is the "old" (base) value before calculating — reversing them silently produces a plausible-looking but incorrect percentage, which is easy to miss in a spreadsheet without a second look.
Frequently asked questions
Because each percentage applies to a different base value — the decrease applies to the already-increased amount, not the original, so the two don't cancel out exactly.
To fully recover from a percentage loss, the required percentage gain is always larger than the loss itself, because the recovery percentage is calculated on the new, smaller base.