Rule of 40 Calculator & SaaS Benchmark
The Rule of 40 says a healthy SaaS company's revenue growth rate plus its profit margin should add up to at least 40%. Enter your numbers below to get your score, understand the rule of 40 meaning, and see how you rank against 172 public SaaS companies.
Free SaaS benchmark
Rule of 40 calculator
Year-over-year recurring revenue growth, usually ARR or MRR.
Enter your actual value before relying on this benchmark.
Your margin for the same period. Free cash flow margin is most common.
Enter your actual value before relying on this benchmark.
Margin type?
Your score?
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growth + margin
← Enter these values first↑ Enter these values first
Add your real growth and margin values
Revenue growth rate should be your YoY ARR or MRR growth. Profit margin should use the same period. If either value is unknown, estimate it before using the benchmark.
- Revenue growth rate is missing
- Profit margin is missing
Track this automatically?
Latenode can pull your live MRR and margin from Stripe and your data warehouse, recompute your Rule of 40 every month, and alert you if you drop below 40.
See the full distribution?
View the 172-company Rule of 40 score distribution, the 40 threshold, and your marker in one place.
Distribution of Rule of 40 scores across 172 public SaaS companies. Median 30.8; about a third score 40 or higher. Data: public company filings, April 2026.
Rule of 40 Public SaaS Benchmarks?
How your score slots in against well-known public SaaS companies. Figures are each company's most recently reported quarter, compiled from public company filings.
| Reddit (RDDT) | 64.6% | 34.2% | 98.8 |
| Palantir Technologies (PLTR) | 64.1% | 32.0% | 96.1 |
| Duolingo (DUOL) | 39.9% | 35.0% | 74.9 |
| Dynatrace (DT) | 34.4% | 39.0% | 73.4 |
| ServiceNow (NOW) | 22.7% | 36.7% | 59.4 |
| Datadog (DDOG) | 29.7% | 26.1% | 55.8 |
| Snowflake (SNOW) | 29.2% | 23.9% | 53.1 |
| CrowdStrike (CRWD) | 21.7% | 27.2% | 48.9 |
| Microsoft (MSFT) | 27.2% | 21.7% | 48.9 |
| Adobe (ADBE) | 11.5% | 33.8% | 45.3 |
| Salesforce (CRM) | 9.6% | 34.7% | 44.3 |
| Zoom Communications (ZM) | 4.4% | 39.5% | 43.9 |
| MongoDB (MDB) | 22.8% | 20.3% | 43.1 |
| Workday (WDAY) | 13.1% | 29.1% | 42.2 |
| Cloudflare (NET) | 31.4% | 9.7% | 41.1 |
| Shopify (SHOP) | 24.5% | 16.0% | 40.5 |
| Bill.com (BILL) | 22.1% | 16.1% | 38.2 |
| HubSpot (HUBS) | 20.5% | 16.7% | 37.2 |
| Procore Technologies (PCOR) | 15.7% | 17.3% | 33.0 |
| Confluent (CFLT) | 21.1% | 5.2% | 26.3 |
| Toast (TOST) | 24.0% | 1.9% | 25.9 |
| Dropbox (DBX) | -1.3% | 26.3% | 25.0 |
| Twilio (TWLO) | 14.6% | 8.1% | 22.7 |
| Asana (ASAN) | 9.3% | 10.9% | 20.2 |
Public companies report this every quarter. You can too - automatically.
What is the Rule of 40??
The Rule of 40 is a SaaS health benchmark: revenue growth rate plus profit margin should equal 40% or more. The rule of 40 definition is simple: add growth and margin. If you are asking what is rule of 40, think of it as a rule of 40 business benchmark for balancing growth and profitability.
Rule of 40 formula?
The rule of 40 formula is straightforward: Rule of 40 score = revenue growth % + profit margin %. For anyone asking how to calculate rule of 40, the rule of 40 calculation for 25% growth plus 15% margin equals a score of 40.
Public SaaS benchmark?
This calculator compares your Rule of 40 score against 172 public SaaS companies. The median public SaaS score is 30.8, and 33.7% score 40 or higher.
Automation next step
Instead of recomputing the metric every quarter, automate ARR, MRR, margin, and alerting workflows in Latenode.
How to calculate the Rule of 40
Find your year-over-year recurring revenue growth rate as a percentage.
Choose the profit margin definition you will use for the same period: free cash flow margin, EBITDA margin, or operating margin.
Add growth rate and profit margin together. The sum is your Rule of 40 score.
Compare the score to 40, then benchmark it against public SaaS company distribution data.
How your score ranks against public SaaS companies
The company table and distribution chart use a dataset of 172 public SaaS companies compiled from public company filings. These Rule of 40 companies give your score a concrete market context, so you can see whether you are near the median, above the 40 threshold, or in the top decile. The named examples include Rule of 40 Palantir, Salesforce, Shopify, HubSpot, and other public software rows.
Data: public company filings, April 2026.
The Rule of 40 in SaaS?
The Rule of 40 in SaaS became popular because software companies can create value through fast growth, high profitability, or a balanced mix of both. It gives operators and investors one fast lens for growth-versus-profitability tradeoffs.
A SaaS rule of 40 score below 40 is not automatically bad, but rule of 40 SaaS analysis asks a useful question: should the company improve growth, margin, or both?
Rule of 40 and SaaS valuation?
Rule of 40 valuation analysis is common because higher scores often correlate with stronger enterprise-value-to-revenue multiples. McKinsey found that roughly one-third of software companies achieve the Rule of 40, and only a smaller group exceeds it consistently over time.
Rule of 40 for stock investors
Investors use the Rule of 40 for software stocks as a screening metric. Rule of 40 stocks research, rule of 40 investing analysis, and rule of 40 finance screens usually ask whether a company has enough growth, profitability, or both to suggest healthier operating leverage than peers below the threshold.
The weighted Rule of 40 (Rule of X)?
The weighted Rule of 40, sometimes called the Rule of X, gives revenue growth more weight than margin. A common version is growth x 2 + margin, based on the view that one point of growth can create more value than one point of margin. Toggle Pro mode in the calculator to compare the weighted score.
Limitations of the Rule of 40
- Check: It is noisy for very early-stage SaaS companies because growth and margin can swing sharply from quarter to quarter.
- Check: Different teams use different margin definitions, so comparisons only work when the definition is consistent.
- Check: It is a health metric, not a full valuation model. Retention, market size, efficiency, and product quality still matter.
Automate Rule of 40 monitoring with Latenode
Connect Stripe, your warehouse, spreadsheets, and Slack in one workflow. Latenode can pull live MRR? or ARR?, compute margin, calculate the Rule of 40, save history, and alert your team when the score drops below 40.
Related free tools
Keep modeling SaaS and automation economics with adjacent Latenode calculators and resources.