How to Calculate Month-Over-Month Percentage Change
Master quantifying periodic changes in your data. Learn to measure growth and decline for clear insights into performance trends.
Month-over-month (MoM) percentage change is a straightforward metric for evaluating performance trends across various financial and operational aspects of a business. It quantifies the shift in a value from one month to the next, offering immediate insights into short-term dynamics. This change helps track indicators like sales revenue, website traffic, or operating expenses, identifying whether a metric is growing, declining, or stable.
The Core Calculation Formula
Calculating month-over-month percentage change involves a precise mathematical formula. The formula is: ((Current Month Value - Previous Month Value) / Previous Month Value) 100. The “Current Month Value” represents the data point for the most recent month being analyzed. The “Previous Month Value” is the corresponding data point from the month immediately prior, serving as the baseline for comparison. The initial step involves determining the absolute difference between the current and previous month’s values, which is then divided by the previous month’s value to find the proportional change, and then multiplied by 100 to convert to a percentage.
Practical Calculation Examples
Applying the month-over-month formula provides insights into performance shifts. Consider sales increasing from $50,000 in January to $60,000 in February. Subtracting $50,000 from $60,000 yields $10,000. Dividing $10,000 by $50,000 gives 0.20, resulting in a 20% positive change, indicating growth.
If website traffic declined from 10,000 visitors in March to 8,000 in April, subtracting 10,000 from 8,000 yields -2,000. Dividing -2,000 by 10,000 gives -0.20, resulting in a -20% change, signifying a decline.
If operating expenses remained constant at $15,000 from May to June, the change would be zero. Subtracting $15,000 from $15,000 results in 0. Dividing 0 by $15,000 yields 0, and the change is 0%, indicating no movement.
Interpreting Your Results
Interpreting the calculated month-over-month percentage change involves understanding what positive, negative, or zero values signify. A positive percentage indicates growth or an improvement in the measured metric from the previous month. For instance, a 15% increase in revenue means the business generated 15% more income than in the prior month.
Conversely, a negative percentage indicates a decline. A -5% change in customer sign-ups shows a reduction in new customers. A zero percentage change means there was no change in the value from one month to the next. The magnitude of the percentage provides context, as a larger percentage suggests a more substantial shift.
Handling Specific Data Situations
When the “Previous Month Value” is zero, direct application of the formula results in division by zero, which is mathematically undefined. In such cases, the percentage growth is often stated as undefined or as infinite growth from zero. Some analyses might simply indicate that a value appeared where none existed before, rather than attempting a percentage.
When the “Previous Month Value” is a negative number, the interpretation of the percentage change can become counter-intuitive. While the formula can still be applied, a positive percentage might indicate movement towards zero or a less negative value, while a negative percentage might mean becoming even more negative. It is important to clearly define what the numbers represent in such instances to avoid misinterpretation.