Business & SaaS · free calculator
SaaS Rule of 40 calculator
Compute SaaS Rule of 40 score (revenue growth + profit margin) and benchmark against public-comparable thresholds for Series A through IPO.
Rule of 40 score
growth + margin
Show the work
- Revenue growth rate41.2%
- EBITDA margin12.5%
- Public-comp percentile80
Rule of 40 — SaaS's single best one-number test
Rule of 40 = revenue growth rate + EBITDA marginA SaaS company that grows 50% YoY at -10% EBITDA margin scores 40. Same company growing 20% at +20% margin also scores 40. The thesis: investors should value either profile equally — growth and profitability are interchangeable in the long run.
Public benchmarks (recent)
- Top decile: 60+ (Snowflake at IPO, MongoDB, CrowdStrike at peak)
- Top quartile: 45-55 (most healthy public SaaS)
- Median: ~30 (most public SaaS in 2023-24 reset)
- Bottom quartile: <20 (struggle profile — slow growth + losses)
Where the rule breaks down
- Late-stage scaling: a $500M ARR company growing 30% with breakeven margin (R40 = 30) is far more valuable than a $20M ARR company growing 25% at -50% margin (R40 = -25). Absolute dollars matter.
- Free cash flow vs EBITDA: stock-based comp pollutes EBITDA. FCF margin is harder but more honest.
- One-time effects: layoffs spike margin temporarily; mid-year price hikes spike growth. Look at TTM trends.
How to improve a low score
- Cut S&M efficiency loss: reduce sales budget per dollar of new ARR — fastest improvement
- Price harder: existing-customer expansion + 10-15% list price increase = ARR growth + margin lift
- Reduce churn: 1pt of churn reduction worth ~3pts of R40 long-term
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