A benchmark stating that a mature software company's combined growth rate and profit margin should exceed 40%.
Why it matters: It balances the trade-off between growth and profitability. You can burn cash if you are growing incredibly fast, or grow slowly if you are highly profitable.
In practice: A SaaS company growing revenue at 30% year-over-year with a 15% EBITDA margin has a score of 45, passing the Rule of 40.