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The Madison Avenue Field GuideA field guide to marketing & advertising, by Brandon Mina

GlossaryMarketing FinanceRule of 40

Marketing Finance

Rule of 40

A SaaS benchmark stating that revenue growth rate plus profit margin, often EBITDA or free cash flow margin, should be at least 40%.

By Brandon MinaCEO, BrandPilot AIUpdated November 2026

Short answer

The Rule of 40 is a SaaS benchmark stating that revenue growth rate plus profit margin, often EBITDA or free cash flow margin, should be at least 40%. It lets investors compare companies with different strategies, since fast growth can offset losses and strong profitability can offset slower growth.