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How to calculate Rule of 40

The Rule of 40 formula, with plain worked examples you can check yourself.

Rule of 40 = g + m

The result is a percentage (%).

Worked examples

g = 50% · m = 5%Rule of 40 = 55%
g = 20% · m = 25%Rule of 40 = 45%
g = 15% · m = 15%Rule of 40 = 30%

How to use it

  1. Write down the values for each letter in the formula.
  2. Do the brackets first, then divide or multiply.
  3. Check the units before you compare results.
  4. Compare the answer with last period or with a competitor to see if it is good or bad.

This formula belongs to Funding & Growth.

Related terms

Venture capitalBurn rateIPOPivotSeed fundingRunway

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