How do I calculate Rule of 40?

Use the formula(s) on this page. Keep inputs consistent by period and basis.

What are good benchmarks?

Benchmarks vary by model and stage. See Benchmarks on this page for ranges.

Inconsistent definitions/time windows; wrong basis (revenue vs gross profit).

Pitchkit

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GLOSSARY

Rule of 40

Growth rate + profit margin; healthy if ≥ 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 with growth %, EBITDA/FCF margin %, Rule of 40.

Deck snippet

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

Back to Glossary

GLOSSARY

Rule of 40

Growth rate + profit margin; healthy if ≥ 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 with growth %, EBITDA/FCF margin %, Rule of 40.

Deck snippet

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

Rule of 40

Why it matters

Worked example

Common pitfalls

How to show in your deck

Deck snippet

Rule of 40

Why it matters

Worked example

Common pitfalls

How to show in your deck

Deck snippet

Formulas

FAQs

Why it matters

Worked example

Common pitfalls

How to show in your deck

Deck snippet

Why it matters

Worked example

Common pitfalls

How to show in your deck

Deck snippet

Formulas

FAQs

How do I calculate Rule?

What are good benchmarks?

Common pitfalls?