SaaS growth-profit balance.

The Rule of 40 sums a SaaS company's growth rate plus profit margin. A score at or above 40% signals balanced performance - either growing fast with some profit, or growing modestly but very profitably. Below 40% usually means the business is either overspending for growth or underinvesting while profitable. Benchmark for public SaaS valuation.

40% growth rate + 10% profit margin = 50% Rule of 40 score. Strong. The business balances growth and profitability well. A 20% growth rate + 30% margin also hits 50 - same Rule of 40 score but different business profile (slower but much more profitable). Investors care about the total; strategic decisions flow from which side to emphasise.

Early-stage SaaS often posts 100% growth with -50% margin (Rule of 40 = 50), which is healthy. Late-stage SaaS runs 20% growth with 20% margin (Rule of 40 = 40), also healthy. Companies at 20% growth with 0% margin (Rule of 40 = 20) are usually penalised by markets - they're neither growing fast nor generating cash. Rule of 40 exposes this neither-nor trap.

Run it with sensible defaults

Using revenue growth rate of 40%, profit margin of 10%, the calculation works out to 50.00%. Nudge the inputs toward your own situation and the output recalculates instantly. The defaults are meant as a starting point, not a recommendation.

The levers in this calculation

The inputs — Revenue Growth Rate % and Profit Margin % — do not pull with equal force. Not every input has equal weight. Flip one at a time toward extreme values to feel which ones move the needle most for your situation.

How the math works

Rule of 40 = growth rate % + profit margin % (as a single additive score). The working is transparent — you can verify every step yourself in the formula section below. No black box, no opaque "proprietary model".

Using this as a check-in

Re-run this every three months. A single reading tells you where you stand; four readings tell you whether things are improving. The trend matters more than any individual snapshot.

What this doesn't capture

The score is a composite of the inputs you provide. Life context — job security, family obligations, health, housing — doesn't appear in the math but shapes the real picture. Use the number as a prompt, not a verdict.