Rule of 40 Calculator
A rule of thumb, not a law.
Rule of 40 score
34.0
below the threshold
Below 40 by 6.0 points. The rule treats a point of growth and a point of margin as equivalent, which is a simplification investors find useful and operators should not take literally.
How the Rule of 40 Calculator works
The Rule of 40 treats a point of growth and a point of margin as interchangeable, which is a simplification investors find useful and operators should not take literally. A business can be perfectly sound below it and hollow above it.
Not financial advice. Marketplace fees change, and they vary by country, plan and seller status. Every rate here is an editable default, not a quoted price — check the platform's current fee schedule before you price a product against it. This is not tax or business advice.
Frequently asked questions
What is the Rule of 40?
Revenue growth rate plus profit margin should exceed 40. A business growing 60% with a 20% loss scores 40; one growing 10% with 30% profit scores the same.
Which margin should I use?
Free cash flow margin or EBITDA margin are both common. Whichever you pick, use it consistently — switching between them to flatter the score is transparent and counterproductive.
Does it apply to small businesses?
The arithmetic works at any size, but the benchmark comes from software companies at scale. A small business growing fast will score far above 40 and a mature one may sit below it while being entirely healthy.
Why is it useful at all?
Because it forces the trade-off into the open. A company burning cash has to justify it with growth, and a slow-growing one has to justify it with profit.