Rule of 40

Why it matters

Balances growth and profitability for mature SaaS; heuristic, not a law.

Worked example

YoY growth 55%; EBITDA margin −10% → Rule of 40 = 45.

Common pitfalls

Using quarterly rates without annualizing; comparing across different revenue quality.

How to show in your deck

Financials slide: small callout—growth %, EBITDA/FCF margin %, Rule of 40.

Deck snippet

55% YoY growth; −10% EBITDA → Rule of 40 = 45.

Formulas

FAQs