Rule of 40 Calculator
Add your revenue growth rate to your profit margin and see how far the total sits above or below 40%, plus the margin you need at today's growth.
- Free
- No sign-up to try
- Works as you type
Rule of 40
Rule of 40 score
35.0%
Above (+) or below (−) 40
−5.0 pts
Margin needed at this growth
10.0%
- Score = revenue growth % + profit margin %.
- Distance from 40 = score − 40.
- Margin needed = 40 − growth %.
Free, no sign-up to try. Save it as a live calculator you can share; an estimate from the numbers you enter, not financial advice. Check the result against your own records before you rely on it.
How it works
How the Rule of 40 Calculator works
- 1
Enter your numbers
Every result updates as you type, with the formula shown under it.
- 2
Check the method
See how each number is worked out and what it assumes.
- 3
Save it as a Room
Share a live calculator: others can change the numbers and see the result update.
Worked example
What it makes
Example inputs
- Revenue growth, year on year
- 30 %
- Profit margin (EBITDA or free cash flow)
- 5 %
Results
- Rule of 40 score
- 35.0%
- Above (+) or below (−) 40
- −5.0 pts
- Margin needed at this growth
- 10.0%
How it's calculated
- Score = revenue growth % + profit margin %.
- Distance from 40 = score − 40.
- Margin needed = 40 − growth %.
- Assumes: Growth and margin cover the same 12 months.
- Assumes: Pick one margin measure (EBITDA or free cash flow) and keep it the same when you compare.
An estimate from the numbers you enter, not financial advice. Check the result against your own records before you rely on it.
Who it's for
Who uses it
SaaS CEOs
Show the board the trade-off between growth and profit.
CFOs
Test what a cost cut or a growth push does to the score.
Investors
Compare companies at different stages on one simple measure.
Good to know
What to consider
- Use the same 12 months for growth and margin.
- EBITDA and free cash flow margin give different scores: pick one and stick to it.
- It is a rough benchmark for software companies, not a pass mark.
Questions
About the Rule of 40 Calculator
Which profit margin should I use?
Most people use EBITDA margin or free cash flow margin. Free cash flow is stricter because it counts cash actually spent. Whichever you choose, use it every time so the scores compare.
Can I share the calculator with my team or a client?
Yes. The Room keeps the calculator live: anyone with the link can change the numbers and see the result update, with the method and assumptions on the same page.
Make your calculator now
Free, no sign-up to try. It becomes a Room you can edit, publish and share.
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