← Back to Glossary
Growth Rate

Growth Rate
Formula.

Updated

The growth rate formula is the simplest financial calculation you will use regularly — and one of the easiest to mess up by getting the denominator wrong or comparing the wrong periods. The mechanics take two minutes to learn; the discipline of applying them consistently takes longer.

The basic formula

Growth Rate = (Ending Value − Beginning Value) ÷ Beginning Value × 100

  • Ending Value — the metric at the end of the period.
  • Beginning Value — the metric at the start of the period.
  • The subtraction gives the absolute change.
  • Dividing by beginning value converts it to a relative rate.
  • Multiplying by 100 expresses it as a percentage.

Worked examples

  1. MoM growth. MRR was $50,000 last month and $55,000 this month. Growth = (55,000 − 50,000) ÷ 50,000 × 100 = 10% MoM.
  2. YoY growth. MRR was $40,000 last May and $60,000 this May. Growth = (60,000 − 40,000) ÷ 40,000 × 100 = 50% YoY.
  3. Customer growth. 800 active subscribers at start of quarter, 920 at end. Growth = (920 − 800) ÷ 800 × 100 = 15% QoQ.

For multi-year periods, use CAGR

The simple growth rate formula does not handle compounding correctly across multiple periods. If MRR went from $100,000 to $200,000 over 4 years, the simple formula gives 100% growth — which is true total growth, but says nothing about annual rate. Use the CAGR formula for any period longer than one year.

Common mistakes

  • Wrong denominator. Always divide by the beginning value, not the ending value or the average. Using the wrong denominator distorts the rate.
  • Mixing metrics. Compare MRR to MRR, customer count to customer count, etc. Don't mix.
  • Ignoring seasonality. A 20% MoM growth from December to January means little if your business is seasonal. Use YoY for seasonal businesses.
  • Comparing unequal periods. A 30-day month vs. a 31-day month is fine; comparing a 28-day February to a 31-day March without adjustment overstates February's growth.
  • Using the formula for negative or zero starting values. The math breaks. Use absolute change instead.

For broader context see growth rate and CAGR.

Frequently Asked Questions

What is the formula for growth rate?

Growth Rate = (Ending Value − Beginning Value) ÷ Beginning Value × 100. The result is the percentage change between two periods. Used for month-over-month, year-over-year, or any single-period growth calculation.

How is the growth rate formula different from CAGR?

The simple growth rate formula calculates change between two points without accounting for compounding — useful for single-period (MoM, YoY) measurements. CAGR uses an exponential formula to find the smoothed annual rate across multiple periods. Use simple growth for single periods; use CAGR for multi-year spans.

What growth rate is healthy month-over-month?

Depends on stage. Early-stage subscription businesses commonly see 10–20% MoM growth. Growth-stage businesses see 5–10%. Scale-stage and mature businesses are lower — 1–3% MoM compounds to strong annual rates. Compare against your own trend and stage benchmarks.

Should I calculate growth rate in dollars or percentages?

Both, depending on audience. Percentages are useful for comparing across businesses of different sizes. Absolute dollar growth is more useful internally — a 50% MoM growth on $10K MRR ($5K added) is very different from 50% MoM on $1M MRR ($500K added). Track both, report the one that fits the conversation.

Keep learning

Related Glossary Entries

Browse all terms

Start Growing Your Subscription Revenue

Join 5,000+ Shopify merchants using Joy Subscriptions. Free to install, no credit card required.

Get Started Free
  • Free 14-Day Trial
  • No Credit Card Required
  • Cancel Anytime