What is CMGR? Compound Monthly Growth Rate ...

Based on our analysis of hundreds of SaaS companies, compound Monthly Growth Rate (CMGR) provides the monthly equivalent of CAGR, offering a more granular view of growth trajectory that is particularly useful for early-stage SaaS companies and operational planning. While CAGR smooths growth over years, CMGR reveals month-over-month compounded performance, making it ideal for board meetings, investor updates, and short-term forecasting. According to Y Combinator research, the top-performing startups in their portfolio demonstrate consistent CMGR above 15% in their first two years—a benchmark that separates companies on trajectory to unicorn status from average performers. Understanding CMGR helps founders communicate growth momentum, identify acceleration or deceleration patterns, and make informed decisions about hiring, investment, and market expansion. This comprehensive guide covers the CMGR formula, calculation methodology, conversion between CMGR and CAGR, benchmarks by stage, and strategies to improve monthly growth rates.

What is CMGR?

Compound Monthly Growth Rate represents the mean monthly growth rate that, compounded over a period, produces the observed total growth. Like CAGR but measured monthly, CMGR smooths volatility to show consistent month-over-month performance.

CMGR Definition and Concept

CMGR answers the question: "What constant monthly growth rate would take me from starting value to ending value over this time period?" If you grew from $100K to $200K MRR over 6 months, your CMGR would be approximately 12.2%—meaning 12.2% monthly growth, compounded for 6 months, produces 100% total growth. This is more nuanced than simple month-over-month calculations that can be distorted by a single strong or weak month.

Why CMGR Matters for Early-Stage SaaS

Early-stage companies experience significant monthly volatility—a big customer signing or churning can swing month-over-month growth dramatically. CMGR smooths these variations to reveal underlying growth momentum. Investors use CMGR to assess whether a company is consistently growing versus having occasional spikes. A company with 15% CMGR over 12 months has demonstrated repeatable growth, while one with highly variable monthly growth may face execution concerns.

CMGR vs Month-over-Month Growth

Month-over-month growth compares consecutive months: (This Month - Last Month) / Last Month. CMGR averages growth across an entire period with compounding. Example: If you grew 30%, 5%, 20%, -5%, 25%, 15% over 6 months, your average month-over-month is 15%, but your CMGR is 14.5% (accounting for compounding). The difference matters because CMGR reflects actual cumulative performance, not arithmetic average.

When to Use CMGR vs CAGR

Use CMGR for: early-stage company updates, operational planning horizons, board meetings and investor check-ins, evaluating recent performance (last 3-12 months). Use CAGR for: fundraising materials requiring multi-year perspective, comparing across different time periods longer than a year, mature company reporting. The choice depends on audience and time horizon—CMGR provides operational granularity, CAGR provides strategic overview.

CMGR to CAGR Conversion

Convert CMGR to CAGR: CAGR = (1 + CMGR)^12 - 1. A 10% CMGR equals 214% CAGR. A 5% CMGR equals 80% CAGR. A 3% CMGR equals 43% CAGR. These conversions help translate monthly performance into annual terms for investor communication.

How to Calculate CMGR

The CMGR formula follows the same structure as CAGR but uses months instead of years. Accurate calculation requires attention to timing and consistent metric definitions.

The CMGR Formula

CMGR = (Ending Value / Beginning Value)^(1/n) - 1, where n is the number of months. Example: Growing from $50K to $150K MRR over 12 months: CMGR = ($150K / $50K)^(1/12) - 1 = 3^(0.0833) - 1 = 1.096 - 1 = 0.096 or 9.6%. Verification: $50K × 1.096^12 = $150K. This 9.6% monthly growth compounded over 12 months produces 200% total growth.

Step-by-Step Calculation

Step 1: Identify your beginning MRR value. Step 2: Identify your ending MRR value. Step 3: Count the number of complete months between measurements. Step 4: Divide ending value by beginning value. Step 5: Raise the result to the power of (1/months). Step 6: Subtract 1 and multiply by 100 for percentage. Example: $25K to $75K over 8 months = ($75K/$25K)^(1/8) - 1 = 3^0.125 - 1 = 0.147 or 14.7% CMGR.

Converting Between CMGR and CAGR

CMGR to CAGR: CAGR = (1 + CMGR)^12 - 1. CAGR to CMGR: CMGR = (1 + CAGR)^(1/12) - 1. Examples: 10% CMGR → 214% CAGR. 100% CAGR → 5.95% CMGR. 50% CAGR → 3.44% CMGR. These conversions enable communication in whichever format your audience prefers while maintaining accuracy.

Common Calculation Mistakes

Mistake 1: Using arithmetic average of monthly growth rates instead of geometric (compounded) average. Mistake 2: Including partial months at start or end—use complete months only. Mistake 3: Mixing different metrics (e.g., bookings at start, MRR at end). Mistake 4: Not adjusting for one-time events (large annual contracts). Mistake 5: Calculating CMGR on annualized numbers (use monthly data directly).

Quick CMGR Mental Math

Useful approximations: 2x in 12 months ≈ 6% CMGR. 3x in 12 months ≈ 10% CMGR. 10x in 12 months ≈ 21% CMGR. 2x in 6 months ≈ 12% CMGR. These help quickly assess whether growth claims are reasonable.

CMGR Industry Benchmarks

CMGR benchmarks help contextualize your performance against peers. Standards vary significantly by stage, with early-stage companies expected to show higher CMGR than mature businesses.

Pre-Seed and Seed Stage Benchmarks

For companies under $100K MRR finding product-market fit: Exceptional: 20%+ CMGR (tripling or more annually). Strong: 15-20% CMGR (roughly doubling in 6 months). Good: 10-15% CMGR (doubling annually). Concerning: Below 10% CMGR at this stage. Early-stage CMGR should demonstrate product-market fit momentum. Consistent 15%+ CMGR attracts top-tier investors and suggests breakout potential.

Series A Stage Benchmarks

For companies with $100K-$1M MRR scaling proven models: Exceptional: 15%+ CMGR while maintaining unit economics. Strong: 10-15% CMGR with improving efficiency. Good: 7-10% CMGR. Concerning: Below 7% CMGR before reaching scale. At Series A, investors want to see that early growth continues as you scale. CMGR deceleration is expected but should remain above 10% for top-tier outcomes.

Series B and Beyond Benchmarks

For companies above $1M MRR proving scalability: Exceptional: 10%+ CMGR (rare at scale). Strong: 7-10% CMGR. Good: 5-7% CMGR. Acceptable: 3-5% CMGR with strong unit economics. At scale, CMGR naturally declines as the base grows. A 5% CMGR at $5M MRR adds $250K monthly—the same absolute dollars that would be 25% CMGR at $1M MRR.

YC Top Company Benchmarks

Y Combinator's research on their top-performing companies reveals elite benchmarks: Top 1%: 20%+ CMGR sustained for 12+ months. Top 10%: 15%+ CMGR sustained for 12+ months. Top 25%: 10%+ CMGR sustained for 12+ months. These represent aspirational targets that separate potential unicorns from average startups. Very few companies sustain 20%+ CMGR—those that do tend to become category leaders.

The "Triple Triple Double Double Double" Equivalent

In CMGR terms, T2D3 (triple, triple, double, double, double over 5 years) requires: Year 1: ~10% CMGR (3x). Year 2: ~10% CMGR (3x). Years 3-5: ~6% CMGR (2x each). Sustaining 10%+ CMGR for two years then 6%+ for three more is extremely difficult—which is why T2D3 companies are rare.

How to Improve CMGR

Improving CMGR requires focusing on the drivers of monthly growth: new customer acquisition, existing customer expansion, and churn reduction. Small improvements compound into significant results.

Accelerating New Customer Acquisition

New MRR from new customers directly drives CMGR. Improve through: shortening sales cycles to close deals faster, increasing marketing efficiency (more leads per dollar), improving conversion rates at each funnel stage, expanding into new channels or segments, and hiring additional sales capacity. Track new MRR as percentage of starting MRR—this is your gross new growth rate before accounting for churn.

Maximizing Expansion Revenue

Expansion from existing customers compounds CMGR without acquisition costs. Strategies include: implementing usage-based pricing that grows with success, creating clear upgrade paths between tiers, adding high-value features or add-ons, expanding within enterprise accounts (land and expand), and proactive success-driven upselling. Net revenue retention above 100% means expansion exceeds churn, providing inherent CMGR floor.

Minimizing Monthly Churn

Churn directly reduces CMGR. At 5% monthly churn, you need 5% new + expansion growth just to stay flat. Reduce churn through: improving onboarding to reach value faster, identifying at-risk customers before they cancel, implementing strong payment recovery for involuntary churn, addressing product gaps causing competitive losses, and building switching costs through integrations and data value. Every 1% churn reduction adds 1% to effective CMGR.

CMGR Improvement Math

Improving CMGR from 8% to 10% over 12 months: At 8% CMGR: $100K becomes $252K. At 10% CMGR: $100K becomes $314K. That 2 percentage point monthly improvement creates 25% more revenue after one year. Because CMGR compounds monthly, small improvements create large absolute differences faster than CAGR improvements.

The CMGR Improvement Flywheel

CMGR improvements create a flywheel: higher CMGR → better fundraising terms → more resources for growth → higher CMGR. Companies that achieve consistently high CMGR can raise capital more easily, hire better talent, and invest more aggressively—all of which support continued high growth.

CMGR in Investor Communications

CMGR is a standard metric for early-stage investor updates and board communications. Understanding how to present CMGR effectively builds credibility and supports fundraising.

How Investors Interpret CMGR

Investors use CMGR to: assess growth momentum and trajectory, compare companies at similar stages, project forward performance for valuation, evaluate execution consistency, and identify acceleration or deceleration. Sophisticated investors calculate CMGR themselves from your data—ensure your reported figures match what they will compute. Inconsistencies damage credibility.

Presenting CMGR in Board Updates

Effective CMGR presentation includes: current CMGR with trailing period specified, comparison to prior period CMGR (showing trend), underlying data (starting and ending values, time period), breakdown by source (new vs expansion vs reduced churn), comparison to plan and industry benchmarks, and context for any unusual months. Provide enough detail for board members to understand drivers, not just the headline number.

CMGR in Fundraising Materials

For fundraising, CMGR demonstrates operational momentum: show consistent CMGR over 6-12 month periods, highlight acceleration if CMGR is increasing, explain any deceleration with credible reasons, convert to CAGR for investors who prefer annual metrics, and project CMGR-based scenarios for use of funds. Strong CMGR history supports aggressive growth projections.

Red Flags Investors Watch For

Investors scrutinize CMGR for manipulation: cherry-picked time periods avoiding weak months, inconsistent calculation methodology, CMGR that does not reconcile with reported MRR figures, and hockey stick CMGR from a very low base. Sophisticated investors will recalculate from raw data. Transparency and consistency build trust; attempts to inflate metrics destroy it.

CMGR and Fundraising Traction

Early-stage investors often use CMGR as primary traction indicator. A company with 15% CMGR over 9 months has stronger signal than one with 10% CMGR over 12 months—even if absolute MRR is similar. CMGR demonstrates rate of progress, which predicts future scale.

Tracking CMGR Automatically

Manual CMGR calculation is straightforward but tedious when done regularly. Automated tracking ensures accuracy, consistency, and real-time visibility into growth momentum.

Manual Calculation Challenges

Calculating CMGR manually faces challenges: ensuring consistent MRR definitions across all months, handling mid-month subscription changes and prorations, accounting for refunds, credits, and adjustments, currency normalization for international revenue, and maintaining historical accuracy as business evolves. Any inconsistency produces misleading CMGR that can misinform stakeholders.

Automated CMGR Benefits

Automated systems provide: real-time CMGR updated as new revenue arrives, consistent methodology applied across all periods, segment-level CMGR (by product, geography, customer type), rolling window analysis (trailing 3, 6, 12 months), and alert thresholds for CMGR changes. Automation eliminates calculation errors while enabling deeper analysis.

CMGR Dashboard Best Practices

Effective CMGR dashboards include: current CMGR versus target and prior period, trend visualization showing CMGR over rolling windows, CMGR breakdown by growth source (new, expansion, retained), comparison to benchmark and plan, leading indicators that predict CMGR, and drill-down capability to understand drivers. Focus on actionability—what can you do to improve CMGR?

CMGR Forecasting

Beyond historical CMGR, forecast future CMGR for planning: model pipeline conversion into expected new MRR, project expansion based on customer success indicators, estimate churn based on health scoring and historical patterns, factor in seasonal effects and planned initiatives. ML-based forecasting improves accuracy by identifying patterns human analysis misses.

QuantLedger CMGR Tracking

QuantLedger calculates CMGR automatically from Stripe data with real-time updates. View CMGR across any time window, segment by customer type or product, and compare against benchmarks—all without manual spreadsheet work.

Frequently Asked Questions

What is a good CMGR for SaaS companies?

Good CMGR varies by stage. Pre-seed/seed companies should target 15%+ CMGR to demonstrate strong product-market fit. Series A companies should maintain 10-15% CMGR while scaling. Series B and beyond typically see 5-10% CMGR as bases grow larger. YC data shows top 10% of companies sustain 15%+ CMGR for extended periods. Compare against companies at similar stages rather than generic averages.

How often should I track CMGR?

Calculate CMGR monthly using rolling windows (trailing 3, 6, 12 months). Weekly CMGR is too volatile to be meaningful. Present CMGR in monthly board updates and quarterly investor communications. Automated systems can calculate continuously, but focus analysis on monthly cadence for actionable insights. Watch for trends in CMGR over time—acceleration or deceleration matters more than any single month.

What is the difference between CMGR and month-over-month growth?

Month-over-month growth measures change between consecutive months: (This Month - Last Month) / Last Month. CMGR smooths growth across a period using compound calculation. If you grew 30%, 0%, 15%, 5% over 4 months, average MoM is 12.5%, but CMGR would be different (accounting for compounding). CMGR better represents sustained growth performance; MoM shows operational volatility.

How do I convert CMGR to CAGR?

CAGR = (1 + CMGR)^12 - 1. For example: 5% CMGR → (1.05)^12 - 1 = 79.6% CAGR. 10% CMGR → (1.10)^12 - 1 = 213.8% CAGR. 15% CMGR → (1.15)^12 - 1 = 435.0% CAGR. Reverse conversion: CMGR = (1 + CAGR)^(1/12) - 1. These conversions help communicate to investors who prefer annual or monthly framing.

Why is my CMGR declining even though MRR is growing?

CMGR can decline while MRR grows if growth rate is decreasing. This is normal as companies scale—adding $100K MRR monthly is 100% CMGR at $100K base but only 10% CMGR at $1M base. Declining CMGR with growing MRR is expected; the question is whether CMGR decline is faster than expected for your stage. Track CMGR against stage-appropriate benchmarks rather than historical CMGR.

How does QuantLedger calculate CMGR?

QuantLedger calculates CMGR automatically from your Stripe payment data using the standard formula: (Ending Value / Beginning Value)^(1/months) - 1. The system handles complexities like prorations, credits, currency normalization, and consistent MRR methodology. View CMGR across custom time windows, segment by customer attributes, and track trends—all updated in real-time as new payments arrive.

Key Takeaways

CMGR provides the monthly growth lens that early-stage companies need for operational planning and investor communication. While CAGR smooths growth over years, CMGR reveals month-to-month compounded performance—essential for understanding momentum, identifying inflection points, and making timely decisions. The best companies sustain high CMGR through consistent execution across acquisition, expansion, and retention. Understanding CMGR calculation, contextualizing against stage-appropriate benchmarks, and communicating effectively to investors are foundational skills for SaaS founders. Whether preparing for your next board meeting or fundraising round, CMGR tells the growth story that demonstrates execution capability and future potential.

Claire Dunphy