← Back to Glossary
Growth Rate, Revenue

Revenue Growth
Rate.

Updated

Revenue growth rate is the headline progress metric of any business. It answers one question — are you bigger than you were last period, and by how much — but how you calculate and present it shapes the answer dramatically. For subscription merchants, the choice between MoM, YoY, and CMGR can change a great-looking number into a worrying one or vice versa.

The three rates that matter

  • Month-over-month (MoM) = (this month − last month) ÷ last month. Sensitive, noisy, useful for spotting recent inflection.
  • Year-over-year (YoY) = (this month − same month last year) ÷ same month last year. Removes seasonality, less responsive to recent changes.
  • Compound monthly growth rate (CMGR) = (latest month ÷ earliest month)^(1/n) − 1, where n is the number of months. The geometric average that smooths month-to-month noise.

Which to use when

For a quick operating read: MoM. For an investor or board update: YoY and CMGR together. For a business plan or forecast: CMGR is the cleanest input because it averages out individual month volatility.

Watch one trap: very early-stage businesses can show eye-popping MoM growth (200%, 300%) that simply reflects a tiny base. The same business showing 8% CMGR over 24 months tells a much more honest story.

What drives subscription revenue growth

  1. New MRR. Revenue from new subscribers in the period.
  2. Expansion MRR. Revenue from existing subscribers who upgrade, increase quantity, or add products.
  3. Contraction MRR. Existing subscribers who downgrade or reduce.
  4. Churned MRR. Subscribers who cancel.

Net MRR growth = (new + expansion) − (contraction + churn). When churn outpaces new acquisitions, growth rate goes negative even when sales activity looks healthy. This is why subscription operators monitor net MRR growth, not just gross new MRR.

Healthy growth-rate ranges

  • Sub-$1M ARR subscription business: 10–20% MoM is achievable; 5–10% MoM is solid.
  • $1M–$10M ARR: 5–10% MoM or roughly 80–100% YoY is fast growth.
  • $10M+ ARR: 30–50% YoY is fast; 100%+ YoY at scale is exceptional.

For the related metric, see growth rate formula; for the compound version, see compound annual growth rate.

Frequently Asked Questions

How do I calculate revenue growth rate?

The basic formula is (current period revenue − prior period revenue) ÷ prior period revenue, expressed as a percentage. For a clean monthly read, use current month MRR vs. prior month MRR. For year-over-year, compare the same month one year apart to neutralize seasonality.

What's a healthy growth rate for a subscription business?

Heavily dependent on scale. Sub-$1M ARR businesses often see 10–20% MoM growth in early months; $1M–$10M ARR is solid at 5–10% MoM; $10M+ ARR is exceptional at 100%+ YoY. Compare yourself to your own trend and to similar-stage benchmarks, not to early-stage hyper-growth stories.

Should I look at gross or net revenue growth?

Net. Gross new MRR can look healthy while churn quietly eats most of it. Net MRR growth = (new + expansion) − (contraction + churn). When this number is positive, the business is actually getting bigger; when it's negative, you're shrinking despite acquisition activity.

Why does month-over-month growth fluctuate so much?

Small bases amplify variance, and subscription revenue is sensitive to short-term events (a campaign, a product launch, a payment-processor outage causing involuntary churn). Use a 3-month rolling growth rate to smooth the noise, or look at compound monthly growth over 6–12 months for trend.

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