SaaS Rule of 40 Calculator
Combine recurring revenue growth and profitability margins to see the SaaS Rule of 40 score for your subscription business.
Educational information, not professional advice.
Examples
- 32.4% growth and 9% margin ⇒ 41.4% Rule of 40 score
- 18% growth and -5% margin ⇒ 13% Rule of 40 score
FAQ
Which margin should I use?
Most SaaS operators use operating margin, EBITDA margin, or free cash flow margin. Choose the one most aligned with your reporting and keep it consistent across periods.
Can the Rule of 40 score be negative?
Yes. Heavy losses combined with slow or negative growth can push the score below zero, signalling an urgent need to improve efficiency or reignite expansion.
How often should I recalculate the Rule of 40?
Recompute the score after each financial close or whenever you update forecasts so board members and investors can track progress in near real time.
Additional Information
- The Rule of 40 equals revenue growth rate plus profitability margin, both expressed as percentages.
- Use the same time horizon for growth and margin inputs, such as trailing twelve months or forward-looking forecasts.
- Negative margins are acceptable; they reduce the score but help highlight the efficiency gap you need to close.