Rule of 40 Calculator
Check whether your SaaS balances growth and profitability. Add your growth rate and profit margin — investors look for the sum to hit 40 or more.
Margin is usually EBITDA or free-cash-flow margin. Early-stage companies often run negative margin offset by high growth.
Your score (growth + margin)
45
Target: 40 or higher
You pass the Rule of 40 — a score of 45 signals an efficient, fundable growth profile.
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How to Use This Calculator
Enter your revenue growth rate (year over year) as a %.
Enter your profit margin (EBITDA or free-cash-flow) as a %.
We add them together for your Rule of 40 score.
A score of 40 or higher signals an efficient growth profile.
Frequently Asked Questions
What is the Rule of 40?
A SaaS benchmark stating that a company’s revenue growth rate plus its profit margin should equal at least 40%. It balances the trade-off between growing fast and being profitable.
Which margin should I use?
Most commonly EBITDA margin or free-cash-flow margin. Use the same definition consistently so the score is comparable over time and to peers.
Is the Rule of 40 realistic for early-stage startups?
Early companies often run negative margins offset by very high growth — that can still pass. As you mature, margin is expected to carry more of the score.
Why do investors care about the Rule of 40?
It’s a quick proxy for capital efficiency. A company growing fast but burning heavily, or profitable but stagnant, both fail — and both worry investors.
How can I improve my Rule of 40 score?
Increase growth (acquisition, expansion revenue, lower churn) or improve margin (pricing, automation, lower CAC). Even small gains in either lever move the score.
Why Use This Calculator
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Instantly see if you pass the Rule of 40
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Understand the growth-vs-profit trade-off
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Benchmark your efficiency for fundraising
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Model how much growth or margin you need to pass
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