The compounded monthly growth rate (CMGR) is the constant monthly rate that carries a beginning value to an ending value: CMGR = (Ending Value / Beginning Value)^(1 / n) – 1. This guide works 3 examples step by step, including $100,000 to $130,000 over 12 months at 2.21% a month, shows the Excel and Google Sheets versions, and covers the period counting trap plus the limits of a single smoothed rate.
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The compounded monthly growth rate answers one question: what single monthly rate, repeated month after month, would have carried your starting number to your ending number? CMGR is the smoothed rate hiding inside a messy series, and it’s what SaaS operators, D2C founders and investors reach for when revenue, users or orders bounce around too much to read month by month.
Most explanations stop at the symbols. This guide gives you the compounded monthly growth rate formula in its nth root form, 3 worked examples recomputed from scratch, the Excel and Google Sheets functions that do it in a single cell, and the period counting mistake that quietly turns a 2.21% answer into 2.04%.
What Is the Compounded Monthly Growth Rate (CMGR)?
CMGR is the constant month-on-month rate that would take a beginning value to an ending value across a set number of months. In symbols, CMGR = (Ending Value ÷ Beginning Value)^(1 ÷ n) – 1, where n is the count of months between the 2 values. It turns a volatile series into one number you can compare and forecast with.
The metric earns its place wherever the monthly cadence is the unit of work: subscription revenue, order volume, active users, qualified pipeline. Any single month tells you little, because seasonality, campaign timing and one large deal all move it. If you track monthly recurring revenue, it is the natural rate to sit beside it.
Why CMGR is not the average of your monthly growth rates
Averaging a column of month-on-month percentages looks like the same calculation. It isn’t. Growth multiplies rather than adds, so a 40% month followed by a 20% fall leaves you at 1.40 × 0.80 = 1.12, not at the 10% average those 2 months suggest. The arithmetic mean always sits at or above the compounded rate, and the gap widens as volatility rises.
CMGR vs a simple growth rate
A simple growth rate compares 2 points and stops: revenue rose 30% over the year. It says nothing about the path or the monthly pace. Dividing that 30% by 12 to get 2.5% a month is the usual shortcut, and it is wrong, because it ignores compounding. The real figure is 2.21%. For how monthly, quarterly and annual framings differ, see our guide to MoM vs QoQ vs YoY growth.
The Compound Monthly Growth Rate Formula
The compounded monthly growth rate formula is CMGR = (Ending Value ÷ Beginning Value)^(1 ÷ n) – 1. Divide the ending value by the beginning value, raise that ratio to the power of 1 divided by the number of months, then subtract 1. Multiply by 100 to read it as a percentage.
The nth root form
Raising a number to the power of 1 ÷ n is the same as taking its nth root, which is usually the clearer way to read the formula: CMGR = nth root of (Ending Value ÷ Beginning Value), minus 1. Over 12 months that means the 12th root of the growth ratio. In the first example below the ratio is 1.3, the 12th root of 1.3 is 1.0221045, and subtracting 1 leaves 2.21%.
What counts as n, and the period counting trap
n is the number of months of growth, not the number of rows in your spreadsheet. January to January is 13 monthly readings but 12 months of growth, so n = 12. Get it wrong and the answer moves: the same $100,000 to $130,000 jump returns 2.21% at n = 12, 2.04% at n = 13 and 2.41% at n = 11. Those are not rounding differences.
How to Calculate Compounded Monthly Growth Rate: 3 Worked Examples
Every CMGR calculation is the same 4 steps: pick the 2 endpoints, count the months between them, take the nth root of the ratio, subtract 1. The examples below run those steps on a full year of revenue, an 8 month user curve, and a volatile 4 month stretch where the monthly average lies.
Example 1: revenue from $100,000 to $130,000 in 12 months
A business starts the year at $100,000 in monthly revenue and finishes at $130,000, with 12 months of growth between the 2 readings.
Check it forwards: $100,000 × 1.0221^12 returns $130,000. Compound 2.21% across 12 months and you land back on 30% for the year, which is exactly what should happen. Run the same rate 6 months further and monthly revenue reaches about $148,219.
Example 2: users from 4,200 to 9,800 in 8 months
A product goes from 4,200 monthly active users in month 0 to 9,800 in month 8. The growth ratio is 9,800 ÷ 4,200 = 2.3333 and n = 8, so CMGR = 2.3333^(1 ÷ 8) – 1 = 0.1117, or 11.17% a month.
That single rate reproduces the whole curve. Starting at 4,200, it produces roughly 4,669, then 5,191, 5,771, 6,416, 7,132, 7,929, 8,815 and finally 9,800. Any month sitting well off that line is worth a look.
Example 3: a volatile 4 months where the average lies
Now a series that swings. Monthly revenue of $200,000 grows 40%, falls 20%, grows 30%, then falls 10%. Average those 4 monthly rates and you get 10% a month. The business actually ends at $262,080, which is 31.04% total growth, not the 46.41% a steady 10% a month would have delivered.
CMGR = (262,080 ÷ 200,000)^(1 ÷ 4) – 1 = 6.99% a month. A steady 10% would have finished the 4 months at $292,820, overstating the business by $30,740 on a base of $200,000.
A volatile 4 month revenue series and the same total growth expressed as a steady CMGR of 6.99% (upGrowth worked example, September 2026)
Month
Actual revenue
Month-on-month change
Value at a steady 6.99% CMGR
Month 0 (start)
$200,000
n/a
$200,000
Month 1
$280,000
+40%
$213,984
Month 2
$224,000
-20%
$228,945
Month 3
$291,200
+30%
$244,953
Month 4 (end)
$262,080
-10%
$262,080
How to Calculate CMGR in Excel and Google Sheets
In both Excel and Google Sheets the formula is =(B13/B1)^(1/12)-1, formatted as a percentage. Both apps also ship a built-in function that returns the same number in one step: =RRI(12,B1,B13).
The formula version
Put your monthly values in column B with the first month in B1. If the last month sits in B13, that is 13 readings and 12 months of growth, so =(B13/B1)^(1/12)-1 gives the CMGR. Format the cell as a percentage with 2 decimals. Pointing the exponent at the row count instead of the gap between readings is where most spreadsheet errors start.
The RRI shortcut
Microsoft documents RRI as a function that returns “an equivalent interest rate for the growth of an investment”, with the syntax RRI(nper, pv, fv). Google Sheets names the same 3 inputs RRI(number_of_periods, present_value, future_value). So =RRI(12,100000,130000) returns 0.022104, the same 2.21%. Google’s own documented sample, =RRI(3,2,4), returns 0.2599210499, which is the cube root of 2 minus 1.
The spreadsheet mistake to avoid
The trap is a column of month-on-month percentages with =AVERAGE() at the bottom. That returns the arithmetic mean, not the compounded rate, and it flatters every volatile series: in example 3 it reports 10% against a true 6.99%. If you want the average of the monthly rates, use GEOMEAN on the growth multipliers (1.4, 0.8, 1.3, 0.9) and subtract 1, which returns 6.99% because the geometric mean is the nth root of the product.
CMGR vs CAGR: Which Growth Rate Should You Report?
Same formula, different period. CAGR counts in years where CMGR counts in months, so the 2 numbers describe identical growth at different resolutions. Convert with CAGR = (1 + CMGR)^12 – 1, or the other way with CMGR = (1 + CAGR)^(1 ÷ 12) – 1. Report CMGR when decisions are monthly and CAGR when the horizon is multi-year.
Converting between CMGR and CAGR
The 2.21% from example 1 annualises to (1.0221)^12 – 1 = 29.99%, which rounds back to the 30% you started with. It works in reverse too. SaaS Capital’s 2026 private SaaS growth rate benchmarks, drawn from more than 1,000 private B2B SaaS companies, report a median growth rate of 22%, down from 25% in 2024. Put 22% through the conversion and the median company is compounding at 1.67% a month.
What a good CMGR looks like
There is no universal number, and anyone quoting one without naming the sample is guessing. That 1.67% a month is a defensible reference point for an established private B2B SaaS business. A company working off a base of a few thousand dollars can post double digit monthly rates that say more about the base than the business. For sector-specific figures, see our MoM growth benchmarks by industry.
Where CMGR Breaks Down, and What It Hides
CMGR draws a straight line through 2 points, so everything that happened between them disappears. It is blind to volatility, hostage to both endpoints, undefined when the beginning value is 0 or negative, and easy to over-read across short windows.
It hides everything in between
Example 3 is the warning. A business that went 40% up, 20% down, 30% up and 10% down reports the same 6.99% as one that grew steadily every month. Those are different businesses carrying different risk, and only one has a repeatable engine. Always show the monthly chart next to the rate.
Both endpoints carry all the weight
Move either end of the window and the answer moves with it. A launch month, a refund-heavy month or a partial month at the edge of the range swings the result more than everything in the middle combined. Pick endpoints that represent normal trading, and state which months you used.
Zero and negative values break the maths
Divide by a beginning value of 0 and there is nothing to compute. Feed the formula a negative value at either end and the root of a negative ratio either errors or returns something meaningless. Google’s RRI documentation requires positive inputs, with the period count and present value above 0. For metrics that can legitimately go negative, such as net profit, use absolute change instead.
Short windows exaggerate
Across 2 or 3 months, ordinary noise looks like a trend. A 3 month CMGR built on one strong campaign month rarely survives contact with month 4. Treat anything under 6 months as directional and pair it with a longer read. Our write-up on what investors read into YoY revenue growth covers the checks that come next.
Compounded Monthly Growth Rate FAQs
What is the compounded monthly growth rate (CMGR)?
CMGR is the constant monthly rate that would take a beginning value to an ending value over a fixed number of months. It smooths a volatile series into one comparable figure, which is why SaaS, D2C and investment teams apply it to revenue, users and orders. It tells you what the average month looked like once compounding is respected, rather than what any single month did.
What is the CMGR formula?
CMGR = (Ending Value / Beginning Value)^(1 / n) – 1, where n is the number of months of growth between the 2 values. Read the exponent as a root: over 12 months you take the 12th root of the growth ratio, then subtract 1. Going from $100,000 to $130,000 across 12 months gives 2.21% a month, which compounds back to 30% for the year.
How do you calculate CMGR in Excel or Google Sheets?
Use =(B13/B1)^(1/12)-1 with your first month in B1 and your last in B13, then format the cell as a percentage. Both apps also include RRI, which Microsoft documents as returning an equivalent interest rate for the growth of an investment, so =RRI(12,100000,130000) returns 0.022104, the same 2.21%. Avoid averaging a column of month-on-month percentages, because that overstates growth.
What is a good CMGR?
There is no universal benchmark, so treat any single figure with suspicion. As a sourced anchor, SaaS Capital’s 2026 research brief covering more than 1,000 private B2B SaaS companies reports a median growth rate of 22% a year, which converts to a CMGR of 1.67%. Early-stage companies growing off a small base often post much higher rates that say more about the base than the business.
What is the difference between CMGR and CAGR?
Only the period. CAGR compounds over years and CMGR compounds over months, so both describe the same growth at different resolutions. Convert between them with CAGR = (1 + CMGR)^12 – 1. The 2.21% monthly rate used throughout this guide annualises to 30%. Use CMGR when decisions are made monthly and CAGR when you are reporting a multi-year trend to a board or an investor.
Can CMGR be negative?
Yes. When the ending value is lower than the beginning value the ratio falls below 1, the nth root falls below 1, and subtracting 1 leaves a negative rate, which is the correct reading of a shrinking business. What the formula cannot handle is a beginning value of 0 or a negative value at either end. Google’s RRI documentation requires positive inputs for the same reason.
Your Next Move: Put CMGR Into Your Monthly Reporting
A CMGR is only as useful as the reporting around it. The version that earns its place in a board pack names both endpoints, states n, sits beside the month-by-month chart, and is read next to a retention or margin number so growth and quality arrive together.
If you would rather have that built than described, upGrowth’s growth team sets it up for SaaS, fintech and D2C companies: one agreed metric definition, a dashboard that computes it, and a monthly review where the number drives a decision. Start with our marketing calculators or our guide to the GTM metrics that belong on a founder dashboard.
CMGR is essential for SaaS founders because it cuts through the noise of monthly fluctuations to reveal the true, steady growth rate of subscription revenue. This single, smoothed metric offers a more reliable basis for forecasting and strategic planning than volatile month-over-month figures, which can be misleading. A business with high monthly volatility might see its growth distorted by averaging. For example, a 40% gain followed by a 20% loss is not a 10% average gain; it is a 1.12x multiplier. CMGR correctly captures this compounding effect. By applying the formula (Ending Value ÷ Beginning Value)^(1 ÷ n) - 1, you can:
Establish a reliable baseline for future revenue projections.
Compare performance across different time periods accurately.
Communicate growth to investors with a standardized, defensible metric.
This approach moves you beyond reacting to single-month anomalies. Discover the precise steps to apply this calculation to your own MRR data in the full guide.
The nth root component of the CMGR formula is designed to distill a consistent monthly growth rate from a period of erratic performance, which is common for D2C brands. It effectively finds the single geometric mean that, when compounded over 'n' months, connects the starting and ending user counts, ignoring the chaotic path between them. This is vital for investors who need to see beyond a big holiday sale or a viral marketing campaign. For instance, a brand might see huge user spikes in Q4 and dips in Q1. The nth root of the total growth ratio provides a single, comparable rate like 2.21%, representing the genuine, sustained growth engine of the business. This method allows you to:
Attribute growth to core business strength versus one-off events.
Forecast future user counts with greater confidence.
Benchmark against other D2C companies using a like-for-like metric.
Understanding this mathematical foundation is key to separating hype from health. Learn how to avoid common errors in this calculation by exploring our detailed examples.
The insight from CMGR is fundamentally more accurate because growth compounds, meaning it multiplies rather than adds. A simple average of monthly percentages will almost always overstate the real growth rate, especially when performance is volatile, which can mislead both your team and your investors. The arithmetic mean fails to account for the fact that a percentage drop is applied to a larger base after a gain. For example, a 50% increase followed by a 30% decrease is not an average 10% gain, but a 5% gain overall (1.50 * 0.70 = 1.05). Presenting the compounded monthly growth rate to investors is the stronger choice because it:
Reflects the true geometric progression of your user base.
Provides a single, defensible number for financial models.
Demonstrates financial sophistication and an honest assessment of performance.
Choosing CMGR signals that you understand the mechanics of sustainable growth. The full article provides a side-by-side comparison to make this distinction even clearer.
For a major player like PhonePe, a steady CMGR in active users signifies deep, organic market adoption and network effects, which is far more valuable than erratic growth. A competitor might show a massive 50% jump in one month from a cashback campaign, but if it is followed by a significant drop, their average growth is misleading. PhonePe's CMGR, even if a lower number like 5%, would demonstrate a consistent, compounding expansion of its user base. This steady rate is what builds a defensible moat and long-term enterprise value. By focusing on CMGR, an analyst can:
Filter out the effects of expensive, short-term promotions.
Identify which company is building a more loyal, sticky customer base.
Project long-term market share with greater accuracy.
This metric helps distinguish between a business that is buying growth and one that is earning it. See how to apply this thinking to different datasets with our worked-through examples.
The 2.21% CMGR powerfully illustrates how small, consistent monthly gains build significant value over time, a core principle of compounding. Simply dividing the total 30% growth by 12 gives an incorrect 2.5% monthly rate, which seems like a small difference but leads to major strategic errors. Using the incorrect 2.5% rate would cause a company to over-forecast future revenue, potentially leading to premature hiring, excessive marketing spend, and missed financial targets that erode investor confidence. The correct 2.21% figure provides a realistic baseline for modeling. Accurate CMGR calculation ensures:
Realistic financial forecasting and budget allocation.
Credible and achievable goal-setting for sales and marketing teams.
An accurate valuation based on a sustainable growth trajectory.
This seemingly minor distinction is the bedrock of sound financial planning. The full article breaks down exactly how this small error compounds into a large one over time.
The most frequent and subtle error in CMGR calculation is the "period counting trap": using the number of data points instead of the number of growth intervals for 'n'. For a period from January to January, there are 13 monthly readings but only 12 months of growth. This off-by-one error quietly but significantly distorts the result. As the example shows, miscounting the period for a $100,000 to $130,000 increase from 12 months to 13 changes the CMGR from a correct 2.21% to an understated 2.04%. This mistake systematically lowers your reported growth rate, undervaluing your progress. To avoid this, always remember:
n = (Total Number of Data Points) - 1.
Focus on the number of steps, not the number of signposts.
Double-check your 'n' value before finalizing any growth-related reports for stakeholders.
This small detail has a major impact on financial reporting and strategic decisions. Learn how to set up your spreadsheets to prevent this common pitfall in our complete guide.
An analyst can calculate CMGR in a single cell, but precision is key to avoiding errors. The process involves identifying the correct inputs for the formula and understanding how spreadsheet functions work to find the nth root. Here is a step-by-step plan for an e-commerce company tracking order volume:
Select Your Values: Isolate the Beginning Value (e.g., cell A1) and the Ending Value (e.g., cell A13) for your time period.
Count the Periods (n): This is the critical step. If your data runs from Jan to Jan, that's 13 rows, so your 'n' is 12 (13 - 1). Do not use 13.
Apply the Formula: In your destination cell, type `=((A13/A1)^(1/12)) - 1`. Alternatively, you can use the `POWER` function: `=POWER(A13/A1, 1/12) - 1`.
Format as Percentage: Format the cell as a percentage to display the result, such as 2.21%, for clear interpretation.
This method ensures you avoid the period counting trap and produce a reliable metric for reporting. For more examples and advanced tips, check out the full article.
In unpredictable markets, monthly performance becomes more volatile, making it harder to spot durable trends. CMGR's ability to smooth this volatility and provide a single, stable growth rate becomes an essential tool for strategic clarity and disciplined forecasting. While month-over-month figures might jump and fall due to shifting customer budgets or one-off events, the CMGR over a six or twelve-month period reveals the true operational tempo of the business. This enables leaders to:
Make hiring and spending decisions based on a reliable trend, not short-term noise.
Set realistic investor expectations and avoid reactive strategy shifts.
More accurately model different future scenarios for cash flow and runway.
Mastering CMGR moves leadership from being reactive to proactive. Explore the full article to understand how this metric can anchor your financial strategy in any economic climate.
CMGR solves this problem by using a geometric calculation that correctly reflects compounding, unlike a simple arithmetic average which is misleading. Averaging a 40% gain and a 20% loss suggests a 10% average gain, but the reality is different: $100 growing 40% becomes $140, which then drops 20% to $112. The true gain is 12% over two months, not 20%. The compounded monthly growth rate accurately calculates the steady monthly rate that yields this $112 figure. It provides one number that represents the actual smoothed trajectory. Using CMGR allows you to:
Avoid overstating growth to your board and investors.
Create accurate financial models based on how growth actually works.
Make better decisions by understanding the real momentum behind the volatile numbers.
This prevents you from making strategic errors based on flawed math. The full guide offers more examples of how volatility can distort simple averages.
To track feature adoption with CMGR, you need a disciplined process to ensure your data is clean and your calculation is accurate. This provides a clear signal on whether your launch is gaining sustained momentum. Follow these steps:
Define Your Metric: First, clearly define "adoption." Is it the number of unique users who tried the feature, or users who use it more than X times a month? Be consistent.
Set the Timeframe: Choose a meaningful period, like the first three or six months post-launch. Let's say you're tracking from month-end 1 to month-end 6.
Identify Values: Record the Beginning Value (users at end of month 1) and Ending Value (users at end of month 6).
Calculate 'n': For a 6-month tracking period with 6 data points, the number of growth intervals ('n') is 5 (6-1). This avoids the period counting trap.
Compute CMGR: Use the formula `(Ending Value / Beginning Value)^(1/5) - 1` to find your monthly compounded growth.
This structured approach gives you a reliable metric to report on your feature's success. Dive deeper into applying this formula to different business cases in the full article.
CMGR is superior because it provides a normalized, constant monthly growth rate that reflects the compounding nature of user engagement, whereas a simple growth rate just compares the start and end points. A simple rate stating "users grew 50% this year" hides whether that growth was steady, front-loaded, or came in a single spike. CMGR, by contrast, tells you the equivalent steady monthly pace required to achieve that result. This is vital for a D2C founder because it helps differentiate between sustainable, organic growth and volatile, promotion-driven spikes. A consistent CMGR suggests strong product-market fit and user retention. It allows you to:
Assess the underlying health and stickiness of your user base.
Create more realistic forecasts for server costs and support staff.
Communicate a more sophisticated growth story to investors.
This metric reveals the quality of your growth, not just the quantity. The complete guide explores how to pair CMGR with other metrics for a fuller picture.
Investors look at the qualified pipeline's CMGR because it is a leading indicator of future revenue and a proxy for sales efficiency, whereas raw lead growth can be a vanity metric. A high CMGR in new leads might just reflect high marketing spend, but a strong CMGR in qualified pipeline shows the sales and marketing teams are effectively converting interest into real opportunities. It signals that the company's value proposition is resonating with the right audience. For example, a SaaS company with a steady 4% pipeline CMGR is likely more capital-efficient and predictable than a rival with a volatile 10% CMGR driven by expensive, low-quality leads. An investor analyzing this metric can:
Gauge the health of the sales process from top to bottom.
Forecast future MRR with a higher degree of confidence.
Assess the company's product-market fit and go-to-market strategy.
This focus on quality over quantity is what separates smart investors from the rest. The full article explains which metrics are best suited for CMGR analysis.
Manjusha Karkera is an enthusiastic content marketer who has created numerous engaging and compelling writing pieces for various clients and companies over the years. She enjoys writing pithy content and copy on various sectors like fashion, beauty and wellness, sports, fitness, education, etc. Prior to Team upGrowth, she worked as a Marketing Communications Specialist. Her overall experience includes all forms of content writing and copywriting.
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