Rule of 40 Calculator
Free rule of 40 calculator. Add growth rate + profit margin to score SaaS health.
How Rule of 40 Calculator Works
Rule of 40 = Revenue Growth Rate % + Profit Margin %. A score of 40+ indicates the company balances growth and profitability at a healthy level. Popularised by Brad Feld and Fred Wilson as a benchmark for SaaS health. Early-stage startups often score well below 40 (burning for growth is expected). The Rule of 40 becomes relevant post-Series B when investors expect the growth-profitability balance to materialise.
Rule of 40 Score Interpretation
| Label | Meaning |
|---|---|
| Above 60 | Exceptional — top-quartile public SaaS (HubSpot, Salesforce at peak) |
| 40–60 | Healthy — passes the Rule of 40 comfortably |
| 20–40 | Below threshold — common for early-stage hypergrowth companies burning for growth |
| Below 20 | Significant concern for later-stage companies — revisit growth efficiency |
Frequently Asked Questions
What is the Rule of 40?
The Rule of 40 states that a healthy SaaS company's revenue growth rate plus profit margin should equal at least 40. Example: 30% growth + 15% profit margin = 45 — passes. It was popularised by Brad Feld and Fred Wilson as a quick sanity check for balancing growth and profitability.
What counts as profit margin in Rule of 40?
Typically EBITDA margin or free cash flow margin, not net income margin. Some use operating margin. Be consistent — the benchmark comparisons you use should use the same margin definition.
Can an early-stage startup fail Rule of 40?
Yes, and it's expected. A startup growing 200% YoY with -160% margin still scores 40. The Rule of 40 becomes most relevant post-Series B when investors expect the growth-profitability balance to emerge.
Is my data stored?
No.
Can I use this on mobile?
Yes.
About This Tool
Built by the Calcyo team and last updated June 2026. All calculations follow industry-standard methodology. No data leaves your browser — calculations run entirely client-side using JavaScript. If you spot an error in the formula or benchmark data, email us at support@calcyo.xyz.