Startup Metrics
Rule of 40 Calculator
Evaluate a startup's growth efficiency — the Rule of 40 is the gold standard for SaaS business quality.
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Rule of 40 Score
Grade
Healthy
40
= 60% + -20%
Benchmark tiers
Elite (60+)
Top-tier SaaS (Snowflake, HubSpot)
Healthy (40–60)
VC-backable, strong growth efficiency
Watch (20–40)
Needs improvement — common at early stages
Concerning (<20)
Growth not justifying burn
To hit Rule of 40:
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How to Use This Tool
Enter a SaaS company's revenue growth rate and profit margin (or EBITDA margin). The calculator adds them together to produce the Rule of 40 score — a quick health check used by growth investors.
Rule of 40
Score = Revenue Growth Rate (%) + Profit Margin (%)
A company growing 60% with -20% margins scores 40. A company growing 20% with 20% margins also scores 40. Both are 'healthy' by this metric — it captures the trade-off between growth and profitability.
Why This Matters
The Rule of 40 is the most widely used shorthand for SaaS company health at the growth stage. Companies scoring above 40 are generally considered well-run. It's used by public market investors, M&A teams, and growth-stage VCs as a quick filter. Below 20 usually signals trouble.
Industry Benchmarks
Elite
60+
Top-tier SaaS companies (rare)
Healthy
40–60
Strong fundamentals, attractive to investors
Concerning
< 20
Needs improvement in growth or margins
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