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Twenty-five percent growth and an 18 percent margin
Revenue grew 25 percent. Profit margin is 18 percent on the profit line you chose. The sum is 43.
Revenue growth rate: 25% lower
Change revenue growth rate to 19 % while keeping the other example values the same.
Revenue growth rate: 25% higher
Change revenue growth rate to 31 % while keeping the other example values the same.
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Quick answer
What does the SaaS rule of 40 calculate?
What is the sum of revenue growth and profit margin? This calculator uses revenue growth rate, and profit margin to estimate growth rate plus profit margin immediately in your browser.
With the values currently entered, the result is 43% — rule of 40 score. It also shows revenue growth, profit margin, and gap to 40.
How to use the SaaS rule of 40
- Replace the example values with your own numbers.
- Review the result and supporting figures as they update automatically.
- Check the formula and assumptions before using the estimate for a decision.
Inputs used
- Revenue growth rate — entered in %
- Profit margin — entered in %
SaaS rule of 40 formula
Rule of 40 score = revenue growth rate + profit margin. Gap to 40 = 40 − that sum.
Assumptions
- Bessemer writes the Rule of 40 as the sum of revenue growth and profit margin, and treats a sum of 40% or more as the common published screen. It is an industry check, not a statute.
- FDIC Money Smart writes profit margin as profit divided by revenue. Pick one profit line and keep it. Mixing operating profit with free cash flow moves the sum.
Verify the inputs
Authoritative sources
These sources explain the definitions, factors, or rules behind this tool. Their geographic scope is shown because an official source for one country is not automatically valid somewhere else.
Writes the Rule of 40 as the sum of revenue growth and profit margin, and treats a sum of 40% or more as the common published screen. Bessemer notes it popularized the heuristic.
Profitability and the profit and loss statementFDIC Money Smart for Small BusinessScope: US small-business education; method is generalWrites the P&L as revenue − COGS = gross profit, then − overhead = operating profit, then − income tax = net profit. Profit margin is net profit ÷ revenue.
Beginners’ guide to financial statementsUS Securities and Exchange CommissionScope: General investor education; US sourceWalks an income statement from sales to cost of sales, then to gross profit, operating expenses, and the bottom-line net earnings.
Sources do not endorse Calculum. Check the source date, scope, and your own documents before making a financial, tax, insurance, or reporting decision.
Practical guide
SaaS rule of 40 example and edge cases
The Rule of 40 adds this period’s revenue growth to a profit margin. Bessemer writes that sum and treats 40% or more as the common published screen. FDIC writes profit margin as profit divided by revenue. The two rates use the numbers you type.
Example: Twenty-five percent growth and an 18 percent margin
Revenue grew 25 percent. Profit margin is 18 percent on the profit line you chose. The sum is 43.
- Revenue growth rate
- 25 %
- Profit margin
- 18 %
Calculated result43%rule of 40 score
43 sits 3 points above the published 40 screen. Compound growth from a start value and an ending value is the CAGR calculator.
Example results use the default display profile. The calculator above follows your selected country and units.
How to read the result
- Read the sum first. Then check each piece. A 40 made of 5 percent growth and 35 percent margin is a different shop from 35 percent growth and 5 percent margin.
- Pick one profit line and keep it. Operating profit, net profit, and free cash flow are not interchangeable.
Edge cases worth checking
You compared this month to last month
Annualize or use the same length on both sides. A 25 percent month is not a 25 percent year. Bessemer’s examples use year-over-year growth.
The margin includes a one-off sale of equipment
Take that gain out if you want the operating picture. A one-off lifts the sum this year and disappears next year.
What changes the result most
Revenue growth rate
Test a lower and higher revenue growth rate. A small percentage change can move the final result more than expected.
Profit margin
Test a lower and higher profit margin. A small percentage change can move the final result more than expected.
Try a different scenario
Small changes show whether the answer is stable or sensitive.
Revenue growth rate: 25% lower
19 %37%below the published 40 screen
Revenue growth rate: 25% higher
31 %49%rule of 40 score
Profit margin: 25% higher
23 %48%rule of 40 score
Common mistakes
Check revenue growth rate
Bessemer writes the Rule of 40 as the sum of revenue growth and profit margin, and treats a sum of 40% or more as the common published screen. It is an industry check, not a statute. Make sure this matches the number you enter.
Keep profit margin consistent
FDIC Money Smart writes profit margin as profit divided by revenue. Pick one profit line and keep it. Mixing operating profit with free cash flow moves the sum. Use the same units and time period throughout the calculation.
Do not rely on one saas rule of 40 scenario
Run a cautious case and an optimistic case. The range is often more useful than one exact-looking number.
Use this result well
What is the sum of revenue growth and profit margin?
It does not replace a quote, contract, accountant, or local employment guidance.