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Concept8 min read
Rule of 40
The Rule of 40 is a SaaS benchmark: a healthy software company's revenue growth rate plus its profit margin should total at least 40%. It balances growth and profitability into a single score investors use to value businesses.
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What's inside
- Definition
- Why it matters
- Formula
- Units & benchmarks
- Key levers
- Where it shows up in cases
- How it's charted
- Worked example
- Common traps
- Industry nuances
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