Annualized Growth Rate
Your latest monthly growth compounded across a year — the pace investors actually benchmark.
What is it?
Annualized Growth Rate takes your latest monthly MRR growth and compounds it across twelve months — showing what a full year at the current pace would produce. It converts an unassuming monthly percentage into the yearly rate investors actually benchmark.
Compounding is the point. Four percent a month feels small, but sustained it is roughly 60% a year — and the gap between 4% and 6% monthly becomes enormous once annualized, which is exactly why the annual view is where growth ambitions get set.
How to calculate?
Raise one plus the latest monthly growth rate to the twelfth power, then subtract one: (1 + monthly growth)^12 − 1. A 4% monthly rate annualizes to about 60%. Because it extrapolates a single month, it is sensitive to noise — annualizing a lucky month overstates the trend.
Pair it with the smoothed growth rate so you are compounding a representative month, not an outlier, and treat it as a projection rather than a promise: it assumes the current pace holds all year.