Compound Monthly Growth Rate (CMGR), also known as month-on-month growth rate is a key metric investors usually look at.
The CMGR formula
CMGR turns growth over several months into one steady monthly rate. The formula is:
CMGR = (ending value / beginning value) ^ (1 / number of months) - 1
The three inputs:
- Beginning value. The value of the metric at the start of the period. This can be revenue, monthly recurring revenue, active users, or any count you track over time.
- Ending value. The value of the same metric at the end of the period.
- Number of months. The count of months between the beginning value and the ending value. Use the number of months that have passed, not the number of data points.
To read the result as a percentage, multiply by 100. Wall Street Prep lays out the same five steps: take the beginning and ending values, divide ending by beginning, take the nth root where n is the number of months, subtract 1, then multiply by 100. The rate can be negative. If the ending value is lower than the beginning value, CMGR comes out below zero, which signals a shrinking metric.
A worked example
Suppose a company starts the period with $10,000 in monthly recurring revenue and ends six months later at $16,000. Drop those into the formula:
CMGR = ($16,000 / $10,000) ^ (1 / 6) - 1
The ratio is 1.6. Raise 1.6 to the power of one sixth, which gives about 1.0815. Subtract 1 and you get 0.0815, or a CMGR of about 8.15%. That single number means the company grew its monthly recurring revenue by roughly 8.15% per month, on average, once each month's growth is allowed to compound on the last.
For a longer view, take a company that grows from $10,000 to $20,000 over 12 months. Inkle works this exact example and arrives at a CMGR of approximately 5.95%. Doubling over a year is a much lower monthly rate than it might first seem, because each month builds on a larger base.
CMGR vs CAGR vs month-over-month growth
These three are easy to mix up. They all describe growth, but over different periods and with different math.
| Metric | Period | Compounding | Best for |
|---|---|---|---|
| CMGR | One month, averaged across the window | Yes | Short-term tracking inside a year, such as a product launch or a campaign |
| CAGR | One year, averaged across the window | Yes | Long-term, multi-year trends and strategic planning |
| Month-over-month growth | The change from one month to the next | No | A quick read on the most recent month |
CMGR and CAGR use the same compounding math. The only difference is the unit of time. CMGR measures in months and gives a granular, short-term view; CAGR measures in years and smooths out short-term swings for a long-term picture. Wall Street Prep frames the split the same way: CMGR for monthly performance and rapid changes, CAGR for sustained multi-year growth.
Month-over-month growth is the one that trips people up. It compares one month against the previous month and does not account for compounding, so a single fast month can make a trend look better than it is. As Inkle puts it, CMGR averages the data over several months for a more stable view. For recurring revenue, you will often see CMGR applied to monthly recurring revenue (MRR) and CAGR applied to annual recurring revenue (ARR).
Common questions
What is the compound monthly growth rate?
It is the average rate at which a metric grows each month over a chosen period, with each month's growth compounding on the last. Wall Street Prep describes it as a way to normalize a longer stretch of growth into one steady monthly rate, so you can compare months or compare companies on an even footing.
What is a good monthly growth rate?
It depends on stage. Citing data on month-over-month SaaS growth, Alexander Jarvis writes that healthy rates run about 10% to 20% per month for startups, while established companies often target 5% to 7%. Higher early rates are common because the starting base is small, so judge any rate against your own stage and industry.