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Rule of 40 Calculator

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The Rule of 40 is a SaaS health benchmark stating that a company's revenue growth rate plus its profit margin should add up to 40% or more.

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Rule of 40 Score40%
Rule of 40 Score = Revenue Growth Rate + Profit Margin
Variable Meaning
Revenue Growth Rate Year-over-year recurring revenue growth rate, in percent.
Profit Margin Profitability margin, typically free cash flow margin or EBITDA margin, in percent.

Worked example

Revenue Growth Rate
25%
Profit Margin (FCF or EBITDA)
15%
→ Rule of 40 Score
40%

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Rule of 40 Formula

Rule of 40 Score = Revenue Growth Rate + Profit Margin
Variable Meaning
Revenue Growth Rate Year-over-year recurring revenue growth rate, in percent.
Profit Margin Profitability margin, typically free cash flow margin or EBITDA margin, in percent.

How to Calculate Rule of 40

Worked example

Revenue Growth Rate
25%
Profit Margin (FCF or EBITDA)
15%
→ Rule of 40 Score
40%

Full definition, benchmarks, and common mistakes live on the Rule of 40 glossary page ; quick answers are in the Rule of 40 FAQ .

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