Compound Monthly Growth Rate (CMGR)
Definition
Compound monthly growth rate (CMGR) is the average month-over-month growth rate that would take a metric from its beginning value to its ending value over a given period. It smooths out month-to-month volatility and provides a cleaner measure of sustained growth than simple averaging.
Formula
Overview
CMGR calculates the steady monthly growth rate needed to get from point A to point B over a defined time period. Unlike a simple average of monthly growth rates (which can be skewed by outlier months), CMGR provides a geometrically accurate picture of compounding growth.
The formula is similar to CAGR (compound annual growth rate) but on a monthly basis. This makes it particularly useful for startups where monthly metrics are the standard reporting cadence. CMGR is commonly applied to MRR, ARR, user counts, and revenue to present a clean growth narrative in investor materials.
CMGR is most meaningful when calculated over at least 6–12 months. Shorter periods are too volatile to be informative, while longer periods may obscure recent acceleration or deceleration. A healthy seed-stage SaaS company typically targets a CMGR of 15–20 % on MRR, which compounds to roughly 4–9× annual growth. Even seemingly small differences in CMGR produce dramatically different outcomes when compounded over 12–24 months.
Example
MRR grows from $10K to $40K over 12 months. CMGR = ($40K ÷ $10K)^(1/12) − 1 = 4^(0.0833) − 1 ≈ 12.2 % per month.
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