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SaaS Rule of 40 Calculator

Calculate your Rule of 40 score to balance growth and profitability.

Calculator

Your annual revenue growth percentage.
%
Your EBITDA margin percentage. Can be negative if you are burning cash.
%
RULE OF 40 SCORE
45
High Performance

Exceptional performance. You are successfully balancing rapid growth with profitability.

Formula

Score = Growth Rate % + Profit Margin %

Worked example

If your business is growing at 30% YoY and has a 15% profit margin, your score is: Score = 30 + 15 = 45.

Year-over-Year Growth Rate
30
Profit Margin (EBITDA)
15

Industry benchmarks

High Performance

Exceptional performance. You are successfully balancing rapid growth with profitability.

Average

Solid performance, but consider if you should lean more into growth or focus on efficiency.

Low Performance

Below the healthy threshold. Review your unit economics and growth strategy.

FAQ & key takeaways

How to read this metric

What it measures

The Rule of 40 is a high-level health metric for SaaS companies that suggests their combined revenue growth rate and profit margin should exceed 40%.

Why it matters

It helps founders and investors understand the trade-off between growth and profitability. A company can be losing money if it’s growing very fast, or it can be growing slowly if it’s very profitable - both can be healthy as long as the sum is above 40.

How to improve your score

  1. Accelerate Growth: Invest in proven marketing and sales channels to increase your YoY revenue growth.
  2. Improve Efficiency: Optimize operations and reduce overhead to increase your EBITDA margin.
  3. Reduce Churn: Keeping customers longer is often the most cost-effective way to improve both growth and margin.
  4. Strategic Focus: Decide whether your current stage requires “growth at all costs” or a move toward profitability, and align your resources accordingly.