What is exactly month over month growth rate formula?

[snandy2011]

Hi All,

I know this is not the right place to ask this  question. But, i need to verify one concept. "What is Month over Month growth rate Formula ?". You guys must be thinking why i am asking this question over here rather than searching on google. Because, in my recent project, i  faced a situation where i was forced to apply a different concept regarding Mom..

From the very first day, i know, that month over month growth rate of a single month formula is difference between this month number and last month number and divided that by last month number.Atleast, every google search define this logic. But, what if,anyone tells you to apply Mom growth rate formula is ( this month number / from first to last month cumulative total ).

did not understand!! here is the simple example,

Month       User

Jan              100

Feb              150

Mar               90

Apr                180

May               130

Jun             200

Jul              60

Aug             250

Sept             500

Oct             150

Nov             120

Dec             190

Now, lets suppose, i am calculating month over month growh rate on December, So which logic i should apply,

Logic 1 : This month - Previous Month / Previous Month   

               190-120 / 120 = 0.58 ( Or 58 % )

Logic 2 : This month / Cumulative total from Jan to Nov.

               190 / 1930 =  0.098 (10 % Approx)

Which one is correct? Which one you want to vote logic 1 or logic 2? What is the right answer 58 % or 10 %..?

Please specify,

Thanks,

snandy

[Greg_Deckler · Accepted solution]

Whoever is telling you logic 2 is Month over Month growth rate is wrong. Simple as that. Not saying that Logic 2 is not correct or useful but it is a different calculation than month over month growth rate. Simple definition for MoM growth rate is the percentage growth of a value from one month to the next. 

Logic 2 would not even be classified as a growth rate really. It is really just a % of total. Here's why, it will never be negative given that calculation. A growth rate should be able to be positive or negative. All you have is a simple calculation of % increase in the total number of a value. That is not a growth rate.

So, whoever is telling you that this is a month over month growth rate is simply incorrect and needs to call it what it is, a simple % increase of total. So, not month over month and not a growth rate. 

[snandy2011]

Hi @Greg_Deckler,

Thanks for your reply. I know, Logic 1 is correct.. But, I was forced to apply logic 2..I dnt know why my manager said to me to apply this incorrect logic? when i gave him the justification of logic 1, he insulted me and told i am wrong.. 

So, therefore i am here for verification. Thanks once again for making me right.

Now, i will show your answer to him ..

Thanks a lot..

Sincerely,

Sayam Nandy