Is the business Model Sustainable for SaaS businesses

Here’s my midnight read!

Rule of 40 for SaaS Businesses

One of the most basic metrics used for evaluating SaaS businesses quantitatively is the rule of 40.

The basic intuition with the rule of 40 is that the sum of your growth rate and your profit margin should be >=40%.

So if we model this simple rule using various growth rates and profit margins we arrive at the following table which shows us what are the healthy growth rates and profit margins for the rule of 40 Businesses.

Found this interesting read: Answering the question “Is the business model sustainable?” for SaaS Businesses