Rule of 40 Calculator
Add your revenue growth rate and profit margin to see if you meet the Rule of 40 benchmark. Compare your score against top SaaS companies.
Enter Your Metrics
YoY revenue growth percentage
Can be negative for unprofitable companies
Rule of 40 Score
40
Above the Rule of 40 — strong performance
Score vs. Benchmark
Growth Rate
+30%
Profit Margin
+10%
You are 0 points above the Rule of 40 threshold
Get your Rule of 40 report via email
We'll send a detailed breakdown with optimization strategies.
How It Works
Enter Two Numbers
Input your year-over-year revenue growth rate and your profit margin. Profit margin can be negative for companies still burning cash.
Get Your Score
Your Rule of 40 score is the sum of both numbers. A score of 40 or above means your growth-profitability balance is strong.
Compare & Optimize
See where you rank on the visual gauge and decide whether to lean into growth or profitability to improve your score.
Formula
Rule of 40 Score = Revenue Growth Rate (%) + Profit Margin (%)The Rule of 40 states that a healthy SaaS company's combined revenue growth rate and profit margin should equal or exceed 40%. A company growing 60% YoY with -20% margins scores 40 and passes the test.
Frequently Asked Questions
What is the Rule of 40?
The Rule of 40 is a benchmark used by SaaS investors and operators to evaluate a company's balance between growth and profitability. It states that a healthy SaaS company's revenue growth rate plus profit margin should equal or exceed 40%. For example, a company growing 50% YoY with -10% margins scores 40 and passes. The rule acknowledges that fast-growing companies can sacrifice profitability, and mature companies can grow slowly if they are profitable. Read our full breakdown in the Rule of 40 deep dive.
Is the Rule of 40 still relevant in 2026?
Yes, the Rule of 40 remains a widely used benchmark in 2026, though the market increasingly values profitability over pure growth compared to 2020-2021. Some investors now apply a "Rule of 40 weighted toward profit" where each point of margin is worth more than a point of growth. Others use the burn multiple as a complementary measure. Regardless, the core principle holds: investors want to see that growth and efficiency add up to a strong combined number.
How do I improve my Rule of 40 score?
You can improve your score by increasing revenue growth, improving profit margins, or both. On the growth side, invest in product-led growth, improve conversion rates, and expand into new markets. On the profitability side, reduce customer acquisition costs, improve gross margins, and optimize operational spend. Use our profitability calculator to model margin improvements and our burn rate calculator to see how spending cuts affect your runway and margins.
Understanding the Rule of 40
The Rule of 40 originated from venture capital and has become one of the most cited benchmarks in SaaS. It provides a simple framework for evaluating the tradeoff between growth and profitability -- the two fundamental levers every software company must balance.
Early-stage companies often score high on growth but negative on profitability. A startup growing 80% YoY with -30% margins scores 50, which passes the Rule of 40 comfortably. As companies mature, growth slows and the expectation shifts toward profitability. A mature company growing 15% with 30% margins also scores 45 and passes. The beauty of the metric is that it works across all stages.
According to public SaaS benchmarks, the median public SaaS company scores around 30-35. Companies consistently above 40 include category leaders like CrowdStrike, Datadog, and Atlassian. The top decile scores above 60, combining strong growth with healthy margins. For a deeper look at how burn multiple complements the Rule of 40, check our analysis.
One common critique is that the Rule of 40 treats growth and profitability as equally weighted. In practice, investors often prefer profitable companies when multiples compress. Some analysts use a 1.33x weight on margins, meaning 1% of margin improvement is worth 1.33% of growth. Regardless of the weighting, the directional insight is the same: companies that cannot generate some combination of growth and profit are underperforming.
To apply the Rule of 40 effectively, pair it with other metrics. Use the profitability calculator to model different margin scenarios, and the burn rate calculator to understand how spending changes affect both your runway and your Rule of 40 score. Together, these tools give you a complete picture of your company's financial health.
Track Growth and Profitability in Real Time
Get automated Rule of 40 tracking, trend analysis, and benchmarking across all your business entities. See where every dollar goes.