Why is 12% a month not 144% a year?

Because month two grows on month one. Compounding 1.12 twelve times gives 3.90, so 290% growth, which is more than double the naive figure.

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Month-over-Month Growth Calculator

Period-over-period growth and what it annualises to. Multiplying a monthly rate by twelve understates it badly, because growth compounds.

Also called: month over month growth, mom growth rate.

Growth this period

12%

12% growth. Sustained, that annualises to 289.6% and doubles in 6.12 periods. A steady 12% a month is 289.6% a year, not 144%.

Annualised if sustained

289.6%

Naively multiplied out

144%

Periods to double

6.12

Absolute change

12,000

Multiplier

1.12

How this is calculated

Method and background

How this is calculated

The growth rate is the change over the previous period. Annualising it correctly means compounding: twelve percent a month is not 144% a year, it is 289%, because each month grows on the last. The naive figure is shown alongside precisely so the gap is visible, since it is the single most common error in a growth deck.

growth compounds: annualising means raising to the power of the period count, not multiplying

p: Previous period
c: Current period
n: Periods a year

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

twelve percent in a month

Previous period: 1,00,000
Current period: 1,12,000
Periods in a year: 12

Growth this period12%

The gap this page exists to show: 1.12^12 - 1

Open this example

flat growth annualises to nothing

Previous period: 1,00,000
Current period: 1,00,000
Periods in a year: 12

Growth this period0%

boundary

Open this example

Method and limits

What it assumes

The rate is sustained for the annualisation, which real growth rarely is.

What it deliberately does not model

One period is a very small sample. A single strong month annualised is a forecast, not a measurement.

Formula version 1.0.0 · definition 1.0.0 · India · Report a problem with this calculator

Frequently asked questions

Why is 12% a month not 144% a year?: Because month two grows on month one. Compounding 1.12 twelve times gives 3.90, so 290% growth, which is more than double the naive figure.