Free Rule of 40 Calculator
Calculate the Rule of 40 score for SaaS companies by adding revenue growth rate to profit margin. A score above 40 indicates a healthy balance of growth and profitability.
Rule of 40 Score
45.0
Rule of 40 Score vs Revenue Growth Rate (YoY)
How to Calculate the Rule of 40
Formula
Rule of 40 Score = Revenue Growth Rate (%) + Profit Margin (%)
The Rule of 40 is a SaaS industry benchmark that balances growth against profitability. A company growing at 60% with a -20% margin scores 40, just like one growing at 10% with a 30% margin. The idea is that fast-growing companies can afford to burn cash, while slower-growing ones must compensate with strong margins. Scores above 40 are considered attractive to investors.
Example Calculation
A SaaS company growing revenue at 30% year-over-year with a 15% EBITDA margin.
- 01Rule of 40 = 30% + 15% = 45
- 02Distance from 40 = 45 - 40 = +5
- 03The company exceeds the Rule of 40 by 5 points.
Frequently Asked Questions
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