Compound Monthly Growth Rate Calculator

How it is calculated

Compound monthly growth rate is (ending ÷ starting)^(1 ÷ months) − 1. It is the monthly equivalent of CAGR and the standard measure for businesses growing fast enough that annual figures are too coarse.

Annualised, the equivalent is (1 + CMGR)^12 − 1, which compounds considerably higher than twelve times the monthly rate.

A 6% CMGR is 101% annually, not 72%.

Numbers on it

Revenue growing from $42,000 to $58,000 over six months: CMGR = (58,000 ÷ 42,000)^(1÷6) − 1 = 5.5% a month.

Annualised that is (1.055)^12 − 1 = 90.5%. Multiplying 5.5% by twelve would give 66%, understating it by a quarter.

Projecting forward, twelve more months at 5.5% takes revenue to $110,400. At 4% it reaches $92,900 and at 7% it reaches $130,600.

The spread between a 4% and a 7% monthly rate over a year is $37,700, which is why small differences in compound rates matter far more than they appear to.

What it does not tell you

Short measurement windows are dominated by noise, and a CMGR calculated over three months of a seasonal business measures the season.

It also assumes constant compounding, which no business sustains indefinitely. Projecting a current CMGR two years out produces figures that are arithmetically correct and commercially fictional.

What follows from it

Calculate it over at least six months and prefer a trailing twelve-month window where the data exists, so seasonality is smoothed.

Then project with a decaying rate rather than a constant one. Assuming the current rate persists is the single most common flaw in growth forecasts, and applying even a modest monthly decay produces far more defensible numbers.

What sustains a compound rate

Compound growth requires that the mechanism producing it scales: an acquisition channel with headroom, a referral loop, a product that expands within accounts.

Growth from a one-off event, a launch, a seasonal peak or a single large customer does not compound, and treating it as a rate rather than an event produces forecasts that miss badly.

The diagnostic question is what specifically would have to be true for next month to grow at the same rate. If the answer is a repeatable mechanism, the rate is meaningful; if it is a repetition of something unusual, the number describes history rather than a trajectory.

Cohort-level growth is more informative than aggregate growth for a business acquiring customers steadily, since aggregate figures blend the behaviour of cohorts at different maturities.

Plotting revenue by cohort month shows whether newer cohorts are performing better or worse than older ones at the same age, which aggregate growth cannot reveal.

Applying a decay assumption to forward projections, perhaps a tenth off the rate each quarter, produces forecasts that hold up considerably better than a constant-rate extrapolation.

Weekly measurement suits businesses growing fast enough that a month is too coarse, though the noise rises accordingly and a rolling four-week average is usually the readable compromise.

Comparing the rate against the rate of cost growth is the check that matters for profitability, since revenue compounding slower than costs is a business getting worse while appearing to grow.