Calculator Tools

Rule of 40 Calculator

Calculate your SaaS Rule of 40 score from revenue growth and FCF, EBITDA, or operating margin. Classify against the benchmark and model a target.

Quick scenarios

Current scenario

Growth rate source

Prior period revenue

Use the same period length you will use for the current revenue (typically trailing twelve months).

Current period revenue

Most recent matching period (e.g. TTM Q2 2026 vs TTM Q2 2025).

Margin variant

FCF / Revenue. The most common Rule of 40 variant; rewards cash discipline.

Free cash flow margin (%)

Use negative numbers for unprofitable businesses (e.g. -25 for a 25 percent loss).

Healthy (Rule of 40)

Rule of 40 score

5 above the 40 threshold

Revenue growth rate: +35%
FCF margin: +10%
Growth contribution: 35 pts
Margin contribution: 10 pts

Target scenario (optional)

Model the next twelve months. What growth rate or margin lifts the score over 40? Compare against the current scenario above.

What each Rule of 40 band means

Far below benchmarkBelow 20
Growth plus margin is well under the Rule of 40 threshold. Investors will look for either a clearer path to profitability or a sharp re-acceleration of revenue. Cut spend, raise prices, drop churn, or both.
Below benchmark20 to 39
The business is not yet at the SaaS public-market benchmark. The fastest path is usually growth: every percentage point of net new revenue contributes one-to-one to the score, while margin gains compound slowly.
Healthy (Rule of 40)40 to 59Current
The classic benchmark. Brad Feld's original formulation and the public-comp medians from Bessemer, ICONIQ, and OpenView all sit here. Defensible enough to raise on, scale acquisition, or hold a public-market valuation.
Elite (Rule of 60)60 and above
Top decile across the public SaaS comp set. Either growth is extraordinary, margin is extraordinary, or both. Sustainability is the question; one-quarter blips do not count.

Three accepted margin variants

The Rule of 40 has no single canonical margin definition. Pick the one your investors or board uses; do not mix variants across periods.

Free cash flow margin
FCF / Revenue. The most common Rule of 40 variant; rewards cash discipline.
In use
EBITDA margin
EBITDA / Revenue. Strips out interest, tax, depreciation, and amortization.
Operating margin
GAAP operating income / Revenue. Conservative because it includes stock-based comp.

Plain-text summary

Paste into a board update, fundraise memo, or operating review.

Rule of 40 Calculator summary
Inputs (current)
  Prior period revenue: 10,000,000
  Current period revenue: 13,500,000
  Margin type: Free cash flow margin
  Margin: 10 percent
Results (current)
  Revenue growth rate: +35%
  FCF margin: +10%
  Rule of 40 score: 45
  Verdict: Healthy (Rule of 40)

How the score is calculated

Revenue growth rate: (Current revenue − Prior revenue) / Prior revenue × 100
FCF margin: Free cash flow / Revenue × 100
EBITDA margin: EBITDA / Revenue × 100
Operating margin: Operating income / Revenue × 100
Rule of 40 score: Growth rate (%) + Margin (%)

Notes and caveats

Pick a period and stick to it. Mixing TTM growth with a single-quarter margin (or vice versa) gives a misleading score. Public SaaS comp sheets use TTM on both legs.
Negative margin is allowed. A hyper-growth SaaS at 80 percent revenue growth and a −35 percent FCF margin still clears 40. That is the original point of the rule.
Sustainability matters. A single-quarter spike past 40 is not the same as a multi-year track record. Investors care about how durable the score is.
Apples to apples. Pick one margin variant (FCF, EBITDA, operating) and use it across scenarios when comparing periods or companies.
Local only. Nothing you type is uploaded. Everything is computed in your browser.

How to use

Pick a quick scenario like Best-in-class SaaS, Healthy SaaS, or Hyper-growth, or enter your own numbers.
Choose how to supply growth: From revenue (enter prior and current period revenue) or Direct percent (enter the growth rate directly).
Pick the margin variant your investors use: FCF margin, EBITDA margin, or operating margin. The note under each option explains the trade-off.
Enter the margin as a percent. Negative numbers are allowed for unprofitable businesses (e.g. -25 for a 25 percent loss).
Read the Rule of 40 score on the right, the verdict band, and how far above or below the 40 threshold the company sits.
Toggle Show target to model a next-twelve-months scenario. The comparison table highlights which lever (growth or margin) is moving the score.
Copy the plain-text summary for a board update, fundraise memo, or operating review.

About this tool

Rule of 40 Calculator measures the standard SaaS growth-versus-profitability benchmark introduced by Brad Feld in 2015 and adopted across the public SaaS comp set, Bessemer's Emerging Cloud Index, ICONIQ Growth's State of SaaS, OpenView's SaaS Benchmarks, and most venture and growth-equity diligence decks. The rule is simple: add your revenue growth rate (in percent) to your profit margin (in percent), and a healthy growth-stage SaaS clears 40. Below 40 the business either needs more growth or more margin; 60 and above sits in the elite band. The calculator computes both legs cleanly. The growth-rate leg can be entered as a direct percent or derived from two revenue figures (typically the current trailing twelve months and the prior trailing twelve months), so an operator can keep the math anchored to numbers already in the board deck. The margin leg supports the three accepted variants used in the wild: free cash flow margin (FCF over revenue, the most common public-market variant and the one rewards cash discipline), EBITDA margin (earnings before interest, tax, depreciation, and amortization over revenue), and GAAP operating margin (operating income over revenue, the most conservative because it includes stock-based compensation). The output reports the score to one decimal place, how far above or below the 40 threshold the company sits, the growth contribution in points, and the margin contribution in points, with a band verdict (far below benchmark, below benchmark, healthy Rule of 40, elite Rule of 60) explained in plain language. A target scenario lets a founder or finance lead model the next twelve months: pick a target growth rate and a target margin and read the comparison table to see exactly which lever moves the score and by how much. Six quick presets cover the shapes operators recognize: best-in-class SaaS (55 percent growth with 20 percent FCF), healthy SaaS at the benchmark, hyper-growth and unprofitable (the original case for the rule), slowing growth, burning cash, and mature and profitable. Edge cases are handled honestly. Negative margins are allowed and explicitly supported; the verdict bands cover the full range from far-below-benchmark to elite; and the tool surfaces a clear validation error when prior revenue is zero (because the growth rate would be undefined). A plain-text summary button produces a board-ready report. Useful for SaaS founders deciding whether to lean into growth or pull back on burn, finance leads writing the operating-metrics page in a quarterly board deck, fundraising founders preparing for a Series B or beyond, public-market analysts comparing a company against the SaaS comp set, growth-equity diligence teams scoring a potential investment, and any operator who has heard the phrase Rule of 40 in a board meeting and wants to know where they stand. All math runs locally in your browser. The revenue and margin figures you enter are never uploaded, never logged, and never sent to a server.

Free to use. Works in your browser. No signup, no login.

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