Rule of 40 Calculator

About this calculator

The Rule of 40 is a quick health check for software and SaaS companies: add the revenue growth rate to the profit margin (often EBITDA or free cash flow margin), and a combined score of 40 or higher is considered healthy. A fast-growing but unprofitable company (say, 60% growth, -20% margin = 40) can pass just as well as a slower, highly profitable one (10% growth, 30% margin = 40).

Venture capital investors, private equity firms, and SaaS executives — the metric was popularized by Bessemer Venture Partners — use the Rule of 40 to compare companies at very different growth stages on a single number, and boards use a declining score as an early signal that growth or profitability is deteriorating relative to the other.