Data Deceptions: Regression to the Mean—Why Your Worst (or Best) Month is Probably Temporary

"Things tend to even out over time—whether you like it or not."

Every business has good months and bad months, but not every rise or fall is a trend. One of the biggest statistical traps small business owners fall into is Regression to the Mean—the tendency for extreme events to naturally move back toward the average.

What is Regression to the Mean?

Imagine your business has one terrible month—sales drop, customer complaints rise, and everything seems to go wrong. The next month, things improve dramatically. Did your new strategy fix everything, or was the bad month just an outlier?

Regression to the Mean happens when an unusually high or low result is followed by a more typical result, simply due to randomness. The danger is misinterpreting random fluctuations as meaningful trends and overcorrecting when no correction is needed.

How This Can Mislead Small Businesses

1. Overreacting to a Bad Month

   • A restaurant sees a sharp drop in revenue in January and assumes the menu needs a complete overhaul.

   • In reality, January is just slow every year, and business picks back up naturally.

2. Mistaking a Hot Streak for Skill

   • A sales rep has an amazing quarter and gets promoted—but was it skill or just luck?

   • If it was just an unusually strong quarter, their performance might drop back to normal levels.

3. Jumping to Conclusions About Marketing Success

   • A business launches a new ad campaign, and sales skyrocket the first month.

   • The next month, sales return to normal—was the ad really a game-changer, or was it just lucky timing?

How to Avoid This Trap

1. Look at Long-Term Trends – One bad (or good) month doesn’t mean much—analyze at least several months before making big decisions.

2. Compare to Historical Patterns – Check if past data shows similar swings before assuming something new is happening.

3. Don’t Overreact to Outliers – If something looks too good (or bad) to be true, wait and see if it holds over time.

Why This Matters for PeerView AI

At PeerView AI, we track business trends over time to help you avoid misreading short-term fluctuations. A single great (or terrible) month doesn't always signal a major shift—our insights help you separate real trends from statistical noise, so you don’t make unnecessary changes based on temporary highs or lows.

Final Thought

Your worst month is likely to be followed by a better one. Your best month is likely to be followed by a more average one. Understanding this can save you from unnecessary panic—or misplaced optimism.