Rule of 40 Calculator
Rule of 40 calculator for SaaS growth vs profitability balance
Calculate your Rule of 40 score instantly — growth rate plus profit margin — and see whether your SaaS is balanced for investors.
Formula: Rule of 40 = revenue growth % + profit margin %
What is the Rule of 40?
The Rule of 40 says a healthy SaaS company should have annual revenue growth percentage plus profit margin percentage add up to at least 40. It balances hypergrowth against burn and is a staple of board and investor conversations.
Growth vs margin tradeoff
Early-stage companies often score on growth while later-stage companies lean on margin. Falling well below 40 without a clear path usually means investors will pressure you on efficiency or raise timing.
How Monter Pulse uses Rule of 40
Monter Pulse shows Rule of 40 next to runway, burn multiple, NRR, and default alive status so founders do not optimize one vanity metric while cash risk rises.
FAQ
What is a good Rule of 40 score?
At or above 40 is the classic target. High-growth seed companies may sit below 40 temporarily; Series B+ companies are scrutinized more tightly.
Which profit margin should I use?
Many founders use operating margin or free cash flow margin. Be consistent month to month and disclose the definition in investor updates.
Can Rule of 40 replace runway?
No. A strong Rule of 40 with three months of cash is still dangerous. Always pair efficiency metrics with runway and default alive.