How is the Rule of 40 actually computed and why does it matter?
Direct Answer: Rule of 40 = (Revenue Growth Rate % + EBITDA Margin %) ≥ 40. Example: 30% growth + 10% margin = 40/40. This means a $50M SaaS can be 25% growth + 15% margin, or 35% growth + 5% margin. The rule balances growth vs profitabilit…
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