Benchmark · Established

Rule of 40

Growth rate plus profit margin

What does Rule of 40 mean?

A SaaS rule of thumb that combines growth and profitability percentages to indicate overall balance.

Keep exploring

Gross MarginRevenue minus cost of goods or service delivery, usually expressed as a percentage of revenue.
Contribution MarginThe amount each sale contributes towards fixed costs and profit after directly variable costs are removed.
Burn MultipleA SaaS efficiency metric comparing how much cash was consumed with recurring revenue added over a period.
Magic Number (SaaS)A ratio that relates growth in recurring revenue to prior-period sales and marketing spend; definitions vary, so methodology must be stated.
Revenue ChurnThe percentage or amount of recurring revenue lost through cancellations or downgrades over a period.
Logo ChurnThe percentage of customer organisations that cancel during a period, independent of account size.
Expansion RevenueRecurring revenue gained through upgrades, added seats, usage or cross-sell within the installed customer base.
Contracted ARR (CARR)The annualised recurring value of signed contracts, which may include amounts not yet active; companies must define it consistently.