Separate the total change from the pace.
Total growth describes how much a metric has changed between two points. A compound monthly growth rate expresses the same change as an equivalent constant monthly rate. Actual monthly results can vary widely around that equivalent.
Use comparable definitions and periods. New pricing, acquisitions and changes in accounting can create apparent growth without an equivalent improvement in customer demand. Annualizing a short period can exaggerate the impression of durability.
The formula, made clear.
- Total growth
- Ending value divided by starting value, less one.
- Annualized equivalent
- The same compound rate extended over twelve months.
Put the numbers in context.
Growing monthly revenue from $50,000.00 to $100,000.00 over 12 months means 100% total growth, or approximately 5.95% compounded per month.
| Input | Example value |
|---|---|
| Starting monthly revenue | $50,000.00 |
| Ending monthly revenue | $100,000.00 |
| Elapsed period | 12 months |
| Compound monthly growth | 5.95% |
What this calculation assumes
Comparable positive starting revenue and non-negative ending revenue. An equivalent rate, not a claim that each month grew evenly or a forecast.
What to consider next.
Look at the actual monthly trajectory and distinguish expansion, new business and customer losses.
How we approach financial models →