Rule of 40 Calculator

Check whether growth plus profit margin clears 40, the benchmark investors use for healthy SaaS. The result updates as you type so you can compare scenarios quickly.

The method

How it is worked out

Score = Growth % + Margin %
Growth
Yearly revenue growth
Margin
Profit or EBITDA margin

Keep in mind

What it leaves out

  • Stage mattersEarly startups often miss it while growing fast. It suits later-stage companies best.
  • Which marginEBITDA, free cash flow and net margin all give different scores.
  • A rule of thumbInvestors use it as one signal, not a pass or fail.

Use the calculator to compare scenarios rather than as a guaranteed forecast.

About the Rule of 40 Calculator

Check whether growth plus profit margin clears 40, the benchmark investors use for healthy software companies.

How it works and an example to tryShow less

How to use the result

Revenue growth is this year over last year minus one. The score adds the operating or free-cash-flow margin.

Example to try

Growing from £4m to £5.6m (40%) at a −5% margin scores 35: near the bar, with margin the cheaper fix.

Put it to work

Try it on a real situation

Load an example

What moves the result most

    Worked out from your figures above. Tap a row to try it.

    Who uses it, and when

    SaaS founders preparing for a raise and operators balancing growth against burn.

    Mistakes worth avoiding

    • Mixing operating margin one year and free cash flow the next.
    • Applying the rule to very early companies where growth is lumpy.
    • Counting capitalised development as margin.

    Questions

    What does the Rule of 40 Calculator do?

    Check whether growth plus profit margin clears 40, the benchmark investors use for healthy SaaS.

    How should I use the result?

    Revenue growth is this year over last year minus one. The score adds the operating or free-cash-flow margin.

    Does TechBullion store the information I enter?

    The core calculation or transformation runs in your browser. Normal website security and analytics may still record page-level events, but the tool does not need to create a public record from your inputs.

    What mistakes do people make with a rule of 40 calculator?

    Mixing operating margin one year and free cash flow the next. Applying the rule to very early companies where growth is lumpy. Counting capitalised development as margin.

    Is the result guaranteed?

    No. Use the result as a practical check or planning aid and verify important decisions with the relevant primary source, provider or professional advice.

    Part of the guide · Revenue · 17 tools

    SaaS metrics

    ARR and MRR, CAC and LTV, churn and net revenue retention, payback, magic number, quick ratio, rule of 40, pricing and trial conversion: the numbers investors and operators track.

    Also under “Revenue”

    ARR CalculatorMRR CalculatorSaaS Metrics CalculatorNet Revenue Retention CalculatorChurn Rate CalculatorSaaS Quick Ratio Calculator
    Open the guide: all 17 tools

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    Results are estimates based on the figures entered, for general information only, and not financial, investment, tax or legal advice. See our terms of use.