Rule of 40 Calculator
Add your growth rate to your profit margin and see whether you clear the 40 mark investors look for.
Rule of 40 score
What it measures
The Rule of 40 adds annual revenue growth to profit margin. A fast growing company may burn money, a slow one should make it; the sum should reach 40. Percentages go in as whole numbers, so 2.5 means 2.5 percent.
Why it matters
It is the standard one look health check for SaaS: a shared scale for judging a 60 percent grower losing money against a 10 percent grower printing it.
A worked example
Growing 35 percent with a 10 percent margin scores 45 and clears the bar. Growing 50 percent while burning 30 scores 20 and does not.
How to read and improve it
Below 40, decide which side to fix. Early on, growth is usually the better lever; at scale, margin.
Frequently asked questions
Which margin should I use?
Free cash flow margin or EBITDA margin are both common. Pick one and stay consistent.
Does the rule apply to small startups?
Loosely. Below a few million ARR the number swings too much to steer by, but it is worth knowing.
More in SaaS metrics: SaaS CAC Calculator · Customer Lifetime Value Calculator · Churn Rate Calculator
Next stepWant these numbers moving the right way?We run growth for B2B SaaS companies. Book a call and bring your metrics.
Book a call
