RULE OF 40 CALCULATOR

Score your SaaS against the Rule of 40.

Growth rate plus profit margin equals one number every Series B+ board asks for. Drop the two inputs, see the score, and read the investor-grade verdict.

Your numbers

%
Year-over-year ARR or revenue growth
%
EBITDA margin or free-cash-flow margin — pick one

Where you stack up

Public SaaS benchmark medians by stage (Bessemer / Meritech 2024 data).

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How the Rule of 40 works

Brad Feld popularized it. Bessemer codified it as the single board-meeting metric for SaaS health:

Rule of 40 score = growth rate (%) + profit margin (%)

The threshold is brutally simple — if the sum is at or above 40, the business is operating in a healthy zone. Investors are willing to fund a money-losing company growing fast, or a slow-growing company that's profitable. The two cancel out. What they won't fund is the third quadrant: slow AND unprofitable.

  • 60+: Top-tier. Premium multiples (Datadog, Snowflake, ServiceNow territory in their prime).
  • 40–59: Healthy. Above-market multiples, raising on inbound, M&A bait.
  • 20–39: Below benchmark. Public-comps haircut. Either grow faster or fix unit economics.
  • Under 20: Default-dead trajectory. Investors discount aggressively or pass.

Caveats: meaningful at $10M+ ARR. Below that, growth dominates and margin is noise.