The balance between growth and profitability is a struggle for any SaaS – from quickly expanding startups to successful enterprises seeking to gain traction in new markets. The Rule of 40 is a widely used efficiency metric that provides key insight and helps leadership maintain balance. It's a metric that appeals to both investors and internal stakeholders by offering a clear framework for evaluating a company's financial health. Knowing how to calculate Rule of 40 is critical. The formula is simple: a company's revenue growth rate plus its profit margin should equal or exceed 40%.