Tracking business performance requires clear and actionable metrics. One of the metrics businesses use to understand their short-term progress is month-over-month (MoM) growth. By monitoring MoM growth, you can assess your company’s growth trajectory and make data-based decisions that benefit your business.
In this article, we provide the MoM growth formula along with tips for using this metric effectively. Whether you’re a business leader, analyst, or marketer, understanding MoM growth can offer valuable insights into your company’s operational efficiency.
What is Month-Over-Month Growth?
So, what does month over month mean? MoM growth is a performance indicator that measures the percentage change in a specific business metric from one month to the next. This metric usually represents revenue, customer acquisition, engagement rates, or other essential business factors.
MoM growth is a universal method for analyzing the short-term progress of your business. It helps companies identify seasonal trends, sudden spikes, or declines in performance. It involves comparing consecutive months to detect early signals of success or potential issues. With this data at hand, businesses can better adjust their strategies.
When to Use Month-Over-Month Growth Metric
Month-over-month growth is beneficial for companies in dynamic industries, such as SaaS, e-commerce, and startups, where rapid market changes and evolving customer behavior can significantly impact revenue. In these sectors, MoM analysis helps businesses quickly identify emerging trends, as well as assess the effectiveness of marketing and sales initiatives.
Since month-over-month growth can be used to track multiple business aspects, from the number of users to revenue, there are several scenarios where it is particularly helpful.
Assessing Marketing Campaign Performance
Month-over-month growth helps marketing teams assess the effectiveness of their campaigns by monitoring short-term changes in KPIs. By comparing data from one month to the next, marketers can quickly determine whether a recent campaign, promotional strategy, or product launch has positively influenced sales, website traffic, or customer acquisition.
For instance, if a company launches an advertising campaign in March, analyzing month-over-month growth from February to March can reveal its direct impact.
Tracking Customer Acquisition and Retention
E-commerce businesses monitor month-over-month growth to track customer acquisition and retention rates, as these metrics are critical to sustaining long-term revenue. A steady increase in new customers suggests that marketing efforts, referral programs, or product enhancements are effectively attracting a larger audience. Conversely, a declining churn rate signals improved customer satisfaction, more potent engagement strategies, or the success of loyalty initiatives.
E-commerce platforms also use month-over-month growth trends to measure conversion rates, subscriptions, monthly active users (MAU), repeat purchases, cart abandonment rates, and overall customer lifetime value. By continuously analyzing these shifts, marketing professionals can refine their retention strategies, optimize customer journeys, and proactively address potential issues before they impact long-term growth.
Monitoring Sales and Revenue Trends
Retailers, e-commerce businesses, and service providers use MoM growth to monitor sales performance, ensuring that revenue is trending in the right direction. A sudden drop in revenue may signal underlying issues such as seasonal demand fluctuations, increased competition, or operational inefficiencies. For example, retail businesses often experience post-holiday slowdowns, while e-commerce platforms may see shifts due to changing consumer preferences or digital ad performance. Additionally, they can find causes of declining sales if they analyze customer churn.
Regular MoM analysis enables businesses to respond proactively by refining marketing strategies, optimizing supply chains, or improving customer experiences to sustain steady growth.
Evaluating Product or Feature Adoption
Online retail companies launching new product categories measure month-over-month growth in sales, customer engagement, and market penetration to evaluate the success of their new offerings. A sharp increase in customer engagement metrics in the months following the launch of new product categories indicates strong market interest and the potential for sustained growth in those categories.
Identifying Seasonal Trends and Adjusting Strategy
MoM growth helps businesses account for seasonality by providing a clearer view of short-term performance fluctuations. Industries such as retail, travel, and hospitality often experience predictable demand shifts based on holidays, weather changes, or annual events.
A good example is retail stores that typically see a surge in sales in November and December. Comparing MoM growth during these periods allows businesses to adjust stock levels, optimize promotional strategies, and allocate budgets efficiently. Similarly, travel companies can track seasonal booking trends to refine pricing models and marketing campaigns.
Benchmarking against Competitors and Industry Trends
Comparing month-over-month growth with industry benchmarks helps businesses gauge their competitive position and assess whether their performance aligns with market trends. Industry benchmarks provide context for evaluating MoM changes, assisting companies to determine if their growth is on par with, exceeding, or lagging behind competitors.
For instance, if an industry experiences an average 5% MoM growth rate while a company achieves only 2%, it may indicate a need for strategic adjustments. Potential factors could include weaker marketing efforts, pricing challenges, customer retention issues, or product-market misalignment.
Using MoM growth in these scenarios empowers businesses to quickly identify areas for improvement and sustain continuous growth.
How to Calculate Month-Over-Month Growth
To calculate month over month growth, subtract the previous month’s value from the current month’s value, then divide it by the previous month’s value. Multiply the result by 100 to express it as a percentage:
Month-Over-Month Growth = ((Current Month’s Value – Previous Month’s Value) / Previous Month’s Value) x 100
This MoM formula provides a straightforward way to measure short-term changes in key business metrics and enables companies to track progress and identify patterns over time. A positive MoM growth rate indicates a performance improvement, while a negative rate suggests a decline.
Suppose an e-commerce company recorded sales revenue of $50,000 in January and $55,000 in February. Let’s use the formula to calculate the Month-Over-Month growth in sales:
MoM Growth = ((February Revenue - January Revenue) / January Revenue) x 100
= ((55,000 – 50,000) / 50,000) x 100
= (5,000 / 50,000) x 100
= 10%
With the help of a formula for month over month growth, we can see that the company’s revenue grew by 10% from January to February.
What is CMGR (Compound Monthly Growth Rate)
Compound Monthly Growth Rate (CMGR) is a metric used to measure consistent month-over-month growth over a specified period. Unlike simple MoM growth, CMGR accounts for compounding effects, making it more accurate for evaluating long-term trends.
CMGR is calculated using the following formula:
CMGR = [(Ending Value / Beginning Value) ^ (1 / Number of Months)] – 1
For example, a startup’s revenue was $20,000 six months ago and has grown to $40,000 today. We will use the CMGR formula for the calculation:
CMGR = [(Ending Value / Beginning Value) ^ (1 / Number of Months)] – 1
= [(40,000 / 20,000) ^ (1 / 6)] – 1
= (2 ^ 0.1667) – 1
≈ 0.1225 or 12.25%
That means the company’s revenue has grown at an average rate of 12.25% per month over the past six months.
This metric is used to understand their sustainable growth rate over multiple months rather than just individual month-to-month changes. CMGR is widely used in ecommerce to assess the growth of key metrics such as revenue, customer acquisition, and traffic, providing insights into the business’s stability and scalability over time.
Typical Mistakes to Avoid When Calculating Month-Over-Month Growth
The MoM growth calculation is prone to several common mistakes, which can result in misleading conclusions. Here are key pitfalls you should keep in mind to avoid flawed decision-making:
Common Mistakes to Avoid in MoM Growth Calculation
✔ Ignoring seasonality 📉
✔ Misinterpreting negative growth 🚨
✔ Using inconsistent timeframes ⏳
✔ Overlooking compounding effects 📊
Using Inconsistent Periods
Make sure you are using data from the same time frames each month for comparison. Variations in the number of days (e.g., comparing February to January) or tracking partial months can distort growth calculations and lead to misleading results.
Using Absolute Growth Instead of Percentage Growth
Relying on absolute numbers without converting them into percentage growth can misrepresent the actual performance trend, especially when comparing different business sizes. Percentage growth provides a clearer picture of relative improvements or declines.
Ignoring Seasonality
Some industries experience seasonal fluctuations that can make MoM growth appear misleading. For instance, retail sales typically surge in December due to holiday shopping, while travel businesses may experience spikes in the summer. Failing to account for seasonality may result in overestimating or underestimating actual growth.
Not Adjusting for External Factors
Economic shifts, regulatory changes, or unexpected global events (such as a pandemic or supply chain disruptions) can influence business performance. Adjusting MoM growth calculations to consider these factors ensures a more accurate analysis.
Ignoring the Compounding Effect in Multi-Month Growth
When tracking growth over multiple months, failing to consider compounding effects can lead to underestimating long-term trends. Using the Compound Monthly Growth Rate (CMGR) provides a more precise measurement of sustained growth over time.
Misinterpreting Negative Growth
A month of decline does not necessarily mean your business has long-term problems. It’s essential to analyze broader trends and underlying causes before making reactive business decisions. Identifying whether the decline is due to external factors, seasonality, or operational inefficiencies helps businesses take informed actions.
Misunderstanding Linear Growth
It’s common to interpret all growth as a percentage increase, but this approach can be misleading in the case of linear growth—meaning you’re adding a constant number each month. For example, if a company consistently acquires 200 new customers each month, the growth percentage will differ based on the starting point.
If the company starts with 1,000 customers, going from 1,000 to 1,200 is a 20% increase. But if the company starts with 10,000 customers, going from 10,000 to 10,200 is only a 2% increase. Labeling this as “decreasing MoM growth” inaccurately reflects the steady, predictable progress the company is making, as opposed to exponential growth, where the number of new customers would increase at an accelerating rate each month.
By avoiding these common mistakes, businesses can ensure more accurate MoM growth analysis, leading to better strategic planning and decision-making.
How Yespo Can Help Boost Month-Over-Month Growth
Yespo provides advanced automation and customer data collection tools that enable businesses to run personalized marketing campaigns, improve user engagement, and enhance retention strategies. Yespo’s powerful functionalities include:
- Advanced customer segmentation and predictive analytics for crafting precise and impactful campaigns.
- Personalized product recommendations across all available channels for conversion increasing.
- Automated marketing with 15 highly effective triggers for ecommerce, such as abandoned views, carts, next best offer, and others.
- Seamless omnichannel communication through 9 channels for synchronized and consistent campaigns, and more.
With Yespo, businesses can make strategic adjustments, improve performance, and achieve sustainable month over month growth.
Final Thoughts
Understanding and effectively measuring month-over-month growth is crucial for businesses looking to track monthly progress. Accurately calculating MoM growth provides clear insights into performance trends, allowing companies to identify what is working and what needs adjustment.
However, it’s crucial to steer clear of common mistakes, like fixating on short-term shifts or misreading anomalies caused by isolated events. By balancing MoM analysis with long-term growth rates, companies can ensure they are not only responsive to immediate trends but also strategically positioned for continued success in a competitive landscape.