SaaS metrics · Growth plus profitability

Rule of 40 Calculator

Combine annual recurring revenue growth with EBITDA margin to assess the balance between growth and profitability.

Annual performance

CurrencyPrevious annual revenueCurrent annual revenueCurrent annual EBITDA

Use comparable recurring revenue periods. EBITDA may be negative for a loss-making business.

Rule of 40 results

Revenue growth rate—

EBITDA margin—

Rule of 40 score—

Result—

Gap to 40—

Required EBITDA margin—

Required EBITDA—

Revenue increase—

How the Rule of 40 is calculated

Annual revenue growth rate + EBITDA margin equals the Rule of 40 score. For example, 25% growth plus a 16% EBITDA margin produces 41.

A score of 40 or higher meets the rule; a lower result shows the percentage-point improvement needed through growth, margin or a combination. It is a planning benchmark, not a valuation guarantee.