How to Use Rule of 40 Calculator
The Rule of 40 Calculator sums your year-over-year revenue growth rate and your profit margin (typically EBITDA margin). A combined score of 40 or above indicates a healthy balance between growth and profitability. It also shows the growth-vs-profit weight split so you can see which lever drives your score.
What It Does
Use the calculator with intent
The Rule of 40 Calculator sums your year-over-year revenue growth rate and your profit margin (typically EBITDA margin). A combined score of 40 or above indicates a healthy balance between growth and profitability. It also shows the growth-vs-profit weight split so you can see which lever drives your score.
SaaS founders, CFOs, and investors who need a quick health check on whether a company is growing fast enough to justify its burn, or profitable enough to offset slower growth.
Interpreting Results
A score at or above 40 means the company passes the benchmark. The growth and profit weight percentages show whether the score is growth-driven or profit-driven, which matters for strategy and investor narrative.
Input Steps
Field by field
- 1
Revenue Growth Percent
Enter your year-over-year revenue growth rate as a percentage. Use ARR or MRR growth, whichever your business tracks. Negative values are allowed for shrinking revenue.
- 2
Profit Margin Percent
Enter your profit margin percentage, typically EBITDA or operating margin. Negative values represent losses. Use the same time period as your growth rate.
- 3
Results
Review the combined score, healthy/unhealthy verdict, and the growth vs. profit weight breakdown. A score above 40 is the benchmark; above 60 is exceptional.
Common Scenarios
Use realistic starting points
High-growth pre-profit SaaS
Revenue Growth
60%
Profit Margin
-15%
Score of 45 passes the benchmark despite losses. Investors accept negative margins when growth is strong enough to compensate.
Mature profitable SaaS
Revenue Growth
15%
Profit Margin
30%
Score of 45 also passes, but driven by profitability. This profile appeals to different investor types than the high-growth scenario.
Try These Tools
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Burn Multiple Calculator
Calculate burn multiple (net burn / net new ARR) to gauge capital efficiency and fundraising readiness.
SaaS Quick Ratio Calculator
Calculate SaaS quick ratio from new, expansion, contraction, and churned MRR to assess growth efficiency.
MRR / ARR Growth Calculator
Calculate current MRR/ARR, project growth at 3/6/12 months, Net Revenue Retention, and months to target ARR for SaaS businesses.
FAQ
Questions people ask next
The short answers readers usually want after the first pass.
Sources & References
- The Rule of 40 for SaaS Companies — Bain & Company
- Rule of 40 — Investopedia
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