How to Calculate Month-Over-Month Percentage Change

Month-over-month (MoM) percentage change is a metric used to track the short-term performance of financial and operational indicators. It provides a view of how a specific value evolves from one month to the next, allowing for quick insights into recent performance. This metric is valuable for assessing immediate shifts, identifying nascent trends, and helping to gauge the efficacy of strategies and adapt to changing conditions.

Defining Month-over-Month Percentage Change

Month-over-month (MoM) percentage change represents the rate at which a metric’s value has increased or decreased from one month to the next, expressed as a percentage. This calculation provides a snapshot of immediate performance fluctuations. It differs from longer-term growth metrics, such as year-over-year, by focusing on monthly periodicity.

Businesses and financial analysts use MoM to identify short-term trends, assess seasonality, and pinpoint immediate shifts in key performance indicators. For instance, it can reveal if a marketing campaign impacted sales or if operational costs rose. This metric is useful for rapidly evolving environments, allowing for prompt assessment and strategic adjustments based on recent data.

Gathering Your Data for Calculation

To calculate month-over-month percentage change, data points are required for two consecutive months. For example, analyzing revenue requires total revenue for January and February. The calculation relies on the consistency and comparability of the data. Ensure data points represent the same metric and cover equivalent periods, such as end-of-month figures or monthly averages.

Common data sources include financial statements, sales reports, website analytics, or CRM systems. Verifying data accuracy is important, as errors lead to inaccurate calculations. Consistent data collection methods ensure observed changes reflect performance shifts, not discrepancies.

Step-by-Step Calculation

The calculation for month-over-month percentage change applies the formula: ((Current Month Value - Previous Month Value) / Previous Month Value) 100. This yields the percentage increase or decrease between the two periods.

Consider a business with $100,000 revenue in January and $120,000 in February. To calculate the MoM change, subtract January’s revenue from February’s: $120,000 – $100,000 = $20,000. Divide this difference by January’s revenue: $20,000 / $100,000 = 0.20. Multiply by 100 to express it as a percentage: 0.20 100 = 20%. This indicates a 20% month-over-month revenue growth.

If a company’s expenses increased from $50,000 in March to $60,000 in April, the calculation is: (($60,000 – $50,000) / $50,000) 100 = 20%. This shows a 20% increase. Conversely, if expenses decreased from $60,000 to $55,000, the calculation is (($55,000 – $60,000) / $60,000) 100 = -8.33%, indicating an 8.33% reduction.

A unique situation arises if the previous month’s value is zero. For example, if a new product had zero sales in its first month and $5,000 in sales in its second, a percentage change cannot be calculated using the standard formula due to division by zero. In such cases, it is more appropriate to report the absolute increase, stating that sales grew from $0 to $5,000.

Understanding and Utilizing Your Findings

Interpreting month-over-month percentage changes involves understanding what positive and negative results signify within the metric’s context. A positive percentage indicates growth or improvement, such as increased revenue or customer acquisition. Conversely, a negative percentage points to a decline or unfavorable change, like decreased sales or increased expenses.

MoM findings help identify immediate trends and inform operational decisions. Consistent positive growth suggests successful strategies. Negative shifts, like in website traffic, might signal campaign issues or technical problems. Businesses use these insights to adjust spending, refine marketing, or investigate underlying causes.