Growth % + profit % health check. The Rule of 40 Calculator takes revenue growth rate, profit margin (ebitda or free cash flow) and returns rule of 40 score plus reading, points to 40. Results update as you type, and the formula is shown under the result so you can repeat it in your own spreadsheet.
Startup metrics are about the efficiency of growth: how much it costs to win and keep customers, how fast recurring revenue compounds, and how long the cash lasts. Investors read these numbers before they read the pitch. Use the worked example below to check the maths against your own figures.
How the Rule of 40 Calculator works
The Rule of 40 says a healthy software company's growth rate plus profit margin should exceed 40: fast growth can excuse losses and high margins can excuse slow growth, but not both at once.
Worked example
With the example values (revenue growth rate of 30%, profit margin (ebitda or free cash flow) of 15%), the rule of 40 score is 45; reading Passes the Rule of 40, points to 40 0. Change any figure above and the result updates immediately; use Copy results to paste the summary into a note or email.
Related Calculators
Frequently Asked Questions
How is rule of 40 score calculated?
score = revenue growth % + profit margin %.
Which figures do I need?
Revenue growth rate, profit margin (ebitda or free cash flow). Take them from the same period and the same set of accounts or reports so the ratio is consistent, and check the example values as a guide to the units expected.
What do investors consider healthy?
Common benchmarks: LTV:CAC above 3, CAC payback under 12–18 months, net revenue retention above 100%, monthly churn under 2% for SMB and under 1% for enterprise, and at least 12–18 months of runway.
