Enter two revenue figures and how far apart they are. You’ll get total growth, the steady rate per month or quarter, and what that works out to over a year.
The simplest measure: how much bigger (or smaller) is the ending figure?
It’s easy to understand, but it doesn’t tell you how fast. Doubling in one year and doubling in five years both show up as +100%.
This is the steady monthly (or quarterly) rate that gets you from start to end. It’s what people usually mean by “we grow 6% month over month.”
Here n is the number of months, quarters or years between your two figures.
To compare across businesses or time frames, convert everything to a yearly rate:
MRR grows from $10,000 to $20,000 over 12 months.
A steady 5.9% a month doesn’t sound dramatic, but compounded over a year it doubles the business.
Quarterly revenue goes from $1.2 million to $1.8 million over 6 quarters.
That’s 50% total, or 31.0% annualized.
Annual revenue falls from $2 million to $1.5 million over 2 years.
A 25% drop over two years is about 13.4% lost each year. Shrinking works the same way as growing.
Say your monthly growth went +20%, −10%, +20%, −10%. The simple average is 5% a month.
But the real compounded rate is only 3.92% a month. Bad months hurt more than good months help, so averaging makes things look rosier than they are. Using the start and end figures, like this calculator does, avoids the problem.
It’s how much revenue grew from one month to the next, as a percentage. When people quote a single month-over-month rate for a longer stretch, they usually mean the steady compounded rate, which is the “per month” figure this calculator gives you.
Not quite. ARR is a run rate: your current recurring revenue, scaled up to a year. Annual revenue is what you actually brought in over the past twelve months, including one-time income. A growing company’s ARR is usually higher than its trailing annual revenue.
Because it compounds twelve times. A rate that looks modest each month can add up to a big number over a full year. That’s exactly why it helps to see both.
You can, and the calculator will show it, but read it with care. It assumes your recent pace will keep going for a whole year, and young businesses often see growth slow down as they get bigger.
Compare the same point in the cycle, like this December against last December. Measuring from a slow month to a busy one will make growth look much better than it really is.