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Answers to Frequently Asked Questions about Month on Month Growth
Month-over-month is a measure of business growth: in fact, it is the smallest unit of measurement used to objectively capture the growth rate of a business. A monthly growth rate calculator, also known as a month to month calculator, helps you arrive at this number.
This month to month calculator will eventually scale up to quarterly and yearly growth trackers, which helps you understand growth rates over varied periods of time.
The month on month growth calculator is often used for projections by start-ups and early-stage companies, since monthly growth rates are a great indicator of momentum in the short term, giving start-ups an idea of how quickly they may or may not be able to scale.
The basic MoM formula can be applied to a number of metrics, such as retention rate, conversion rates, monthly active users (MAU), and others.
Growth data should not be restricted to just the finance and product teams: to understand if your resources are being used wisely and whether they are bringing in results, you need to apply the month on month growth calculator across all of your business’ departments. This will give you detailed data which may point to larger trends in the future.
An organisation has several departments and metrics to measure. Naturally, when you work with data across several departments or divisions, you need to collate and flatten that data to produce a month over month calculator rate.
The idea is simple: you study the percentage increase of a certain metric or department over a given time frame – in this case, a month.
A monthly time frame gives you a short-term view. You can use a MOM calculator or MOM grown calculator to arrive at your rate.
The formula version to get to a percentage output for month-specific data looks like this:
Percent increase (or decrease) = (Month 2 – Month 1) / Month 1 X 100
Or, if you would like to look at it in simpler terms:
a = (c – b) / b X 100
This is how a month over month percentage calculator works.
Another commonly used metric is CMGR or compounded monthly growth rate. With CMGR, you look at data from your starting month data and data from your ending month and calculate the percentage monthly increase that would cause the starting month number to grow into the ending month number.
But there is a drawback to the CMGR method: because you are ignoring variations within the month and flattening it out to a singular compounded figure each month.
CMGR works when you are looking at only compounded growth (like a retirement amount) but is not useful when you are looking at linear growth (like your paycheck, which is the same amount each month, irrespective of what you have stocked in the bank). CMGR is not a viable or accurate number if your growth curve is linear and won’t help in projecting future growth.
This is why a month on month growth calculator is a better option to ascertain how much your business is actually expanding.