What customer growth rate measures
Customer growth rate is the percentage change in your number of paying customers over a period. It answers a simple question: do you have more customers than you did, and by how much?
It is a net number. It already includes every customer you won and every customer you lost, which makes it a good headline figure and a poor diagnostic one. Two companies can both grow 25% while one wins a few customers and keeps them all, and the other wins many and loses a lot of them.
How to calculate customer growth rate
Subtract the customers you started with from the customers you ended with, divide by the starting number and multiply by 100.
A worked example:
- Customers at the start: 1,000
- Customers at the end, 6 months later: 1,250
- Growth = (1,250 − 1,000) ÷ 1,000 = 25.0%
Count the same way at both ends. Use paying customers, not sign-ups or free users, and take both counts on the same day of the month. If you count accounts at the start and users at the end, the result means nothing.
Compound growth: CMGR and CAGR
A growth rate over 6 months is hard to compare with one over a quarter or a year. The compound rate per period fixes that. It is the steady rate that would take you from the start count to the end count:
- Compound rate per period = (End ÷ Start)^(1 ÷ periods) − 1
- (1,250 ÷ 1,000)^(1 ÷ 6) − 1 = 3.79% a month
Per month it is called CMGR (compound monthly growth rate). Per year it is CAGR. A company that goes from 1,000 to 1,728 customers in 3 years has a CAGR of 20%.
Don't divide the total by the number of periods. 25% ÷ 6 is 4.17% a month, but 4.17% compounded for 6 months gives 27.8%, not 25%. For the same reason, annualise by compounding, not by multiplying: 3.79% a month is 56.3% a year, not 45.5%.
Gross adds, churn and net growth
The calculator splits the net change into its two parts when you add customers won and lost. In the example, 400 new customers and 150 lost gives:
- New customers: 400 ÷ 1,000 = 40.0% of the starting base
- Churn: 150 ÷ 1,000 = 15.0% over the 6 months, about 2.67% a month
- Check: 1,000 + 400 − 150 = 1,250
Churn took back 37.5% of what acquisition added. With half the churn, the same sales effort would have ended on 1,325 customers, or 32.5% growth. That is why growth and churn belong on the same report.
If start + new − lost doesn't equal your end count, something is being counted differently. The usual causes are reactivated or paused accounts, duplicates merged in the CRM, or the counts coming from different days or systems.
What a good customer growth rate looks like
It depends on stage, market and how you sell. A company with 50 customers can grow 10% a month by winning five; a company with 50,000 needs 5,000. Growth rates usually fall as the base grows, even when the business is doing well.
As a rough guide, look at the annualised rate. Above 50% a year is fast, 20% to 50% is healthy for many established B2B companies, and below 20% means acquisition is only a little ahead of churn. Compare yourself with your own past periods first, and with companies of a similar size and model second.
Common mistakes
- Counting free users. Free sign-ups inflate the number without adding revenue. Track them separately.
- Mixing period lengths. Compare monthly with monthly, or convert both to CMGR first.
- Averaging instead of compounding. Use the compound rate when the counts are more than one period apart.
- Ignoring churn. A healthy net rate can hide heavy churn that gets harder to replace as you grow.
- Projecting too far. A compound rate held for years produces huge numbers. Use the projection to set a ceiling, not a target.
Related tools
Check how many of your starting customers stay with the Retention Rate Calculator, convert churn between monthly and annual with the Churn Rate Calculator, and see what your customer count means for recurring revenue with the MRR Calculator. To win more of the right customers, see our services.