What is Compounded Monthly Growth Rate(CMGR)?

Compounded Monthly Growth Rate(CMGR) is a metric that averages a company’s growth on a month-by-month basis into a single, even rate of growth. Rather than seeing 12 individual (and often inconsistent) monthly rates of growth, the CMGR shows the single even rate at which a metric had to grow every month in order to achieve a certain level of growth between two numbers.

How is CMGR Calculated

The compounded monthly growth rate is calculated using the formula:

The Monthly Growth Factor: Foundation of CMGR

The monthly growth factor is a proportion at which the quantity grows each month, which can be stated as 1 + the monthly growth rate. Thus, for instance, if the revenue increases by 5% during a month, then the monthly growth factor during this period will be equal to 1.05.

CMGR uses the total growth factor calculated for the whole period (ending value / starting value) and determines the constant monthly growth factor which, after being multiplied n times, would yield the same total growth factor. That’s why CMGR can be considered an average monthly growth factor, although it actually is a geometric average.

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