Assess your SaaS health by combining growth rate and profit margin — a score above 40 signals a healthy business.
ARR Growth Rate (%)
Profit / EBITDA Margin (%)
Check whether SaaS growth and profit margin combine to meet the Rule of 40 benchmark.
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Add the ARR growth rate for the period as a percentage. Use a consistent period, such as year-over-year growth, for comparable results.
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Add profit or EBITDA margin as a percentage. Negative margins are allowed because many SaaS companies invest ahead of profitability.
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Run the calculator to add growth rate and margin. The output shows whether the combined score passes, is borderline, or needs improvement.
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Use the score to evaluate growth-versus-profit tradeoffs across quarters, annual plans, or investor reporting scenarios.
Use Rule of 40 to evaluate whether SaaS growth is balanced by operating discipline.
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Convert growth and margin into one simple score that leadership, boards, and investors can use to discuss overall company performance.
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See whether faster ARR growth offsets lower margins or whether stronger profitability compensates for slower expansion.
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Use scenario analysis to understand how hiring, go-to-market spend, pricing, or cost reductions could move the company closer to a 40-plus score.
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Present a familiar SaaS benchmark during fundraising, board reviews, and performance updates without hiding the individual growth and margin inputs.
The SaaS Rule of 40 combines revenue growth rate and profit margin. If the sum is 40 or higher, the company is generally considered to have a healthy balance between growth and profitability.
Add ARR growth rate percentage and profit or EBITDA margin percentage. For example, 35% ARR growth plus 8% EBITDA margin gives a Rule of 40 score of 43.
Many teams use EBITDA margin, while investors may also look at free cash flow margin. Pick one margin definition, label it clearly, and use it consistently when comparing periods or peers.
Yes, high-growth SaaS companies can pass despite negative margins if growth is strong enough. For example, 60% growth and -15% margin produces a score of 45.
A higher score is usually positive, but the mix matters. A company with extreme growth and severe losses may carry different risk than a profitable company with moderate growth.
Track it quarterly or annually when reviewing board metrics, investor reporting, annual planning, or tradeoffs between sales investment, product expansion, and profitability.
Explore related calculators for traffic, monetization, campaign costs, and growth planning.
Evaluate your go-to-market efficiency by measuring how much revenue you generate per dollar of sales and marketing spend.
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Measure your SaaS growth quality by comparing new and expansion MRR against churned and contraction MRR.
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Calculate your Compound Monthly Growth Rate to track and communicate consistent revenue momentum.
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Score your SaaS efficiency using Bessemer's framework to gauge how well your company translates growth into profitability.
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Measure how efficiently your startup is converting burned capital into new annual recurring revenue.
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Estimate your SaaS company valuation based on ARR, growth rate, net revenue retention, and gross margins.
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