SaaS & retention
SaaS Rule of 40 Calculator
Add a SaaS revenue growth percentage and profit margin percentage as a transparent combined indicator.
Use this as a descriptive two-metric sum, not a universal pass-fail rule. Signed growth and margin are valid because shrinking or loss-making businesses can produce negative results.
What the result means
The result is the arithmetic sum of signed revenue growth and profit margin. It describes the supplied pair and does not establish health, valuation, or a required target.
The formula
Revenue growth rate + profit margin
Results are displayed to at most two decimal places. Calculations use the unrounded inputs.
A worked example
Put the formula to work
- Revenue growth rate (% for period)
- 25
- Profit margin (% for period)
- 15
Rule of 40 combined percentage: 40%
Revenue growth of 25% plus a 15% profit margin gives a combined Rule of 40 result of 40%.
How to use this calculator
- Choose matching periods for growth and margin.
- Calculate growth against the prior comparable revenue.
- Use a clearly defined profit margin with losses kept negative.
- Add the two percentage-point values and report the assumptions.
Why this number matters
Keeping both signed measures visible prevents growth and profitability from being discussed as if either one existed alone.
Input definitions
- Revenue growth rate (% for period)
- Percentage growth for the chosen comparable period; negative values represent revenue decline.
- Profit margin (% for period)
- Profit as a percentage of revenue under your stated accounting scope; negative values represent a loss.
Assumptions and limitations
- The metric has no universal accounting definition or decision threshold.
- Growth and margin periods, currencies, and revenue scopes must match.
- It ignores cash needs, retention, market structure, and growth quality.
Methodology
The default result and worked example use the same calculation functions as the interactive tool. The formula cannot verify the quality or scope of your source data.
Read our calculation methodology
Last updated .