Rule of 40 Benchmarks by ARR Band & Growth Category
YoY revenue growth % + FCF margin % by ARR band and growth category. All combinations covered — from hyper-growth seed companies to mature public SaaS.
What is a good Rule of 40 score in 2026?
The classic target is 40, while FPARef's SEC-derived public-company cohort has a median Rule-of-40 proxy of 35.0. Industry medians in the same dataset range from 18.0 (Healthcare / MedTech) to 44.2 (General B2B SaaS), so stage, growth profile, and ARR context matter. For companies under $10M ARR, treat Rule of 40 as secondary context rather than the primary operating benchmark.
How to read this in a board meeting
Read the growth and profitability components beside the total. The same score can describe fast growth with heavy burn or slower growth with strong cash generation. Compare that mix with the company’s stage and peer group. Then use Gross Margin and Burn Multiple to locate the operating and capital-efficiency drivers.
Related: Gross Margin · Burn Multiple · OpEx Ratio
TTM year-over-year revenue growth for public SaaS/software companies, computed directly from SEC filings. Revenue growth is one of the two components of the Rule of 40 score below.
| Industry segment | Median | Cohort | Vintage |
|---|---|---|---|
| Dev Tools / Infrastructure | 22.4% | n=10 | TTM Q4 2025 |
| General B2B SaaS | 13.4% | n=8 | TTM Q4 2025 |
| Security / Compliance | 19.5% | n=9 | TTM Q4 2025 |
| MarTech / Sales Tech | 12.3% | n=9 | TTM Q4 2025 |
| Vertical SaaS | 15.6% | n=10 | TTM Q4 2025 |
| Fintech / Payments | 25.3% | n=8 | TTM Q4 2025 |
| HR / Workforce | 11% | n=6 | TTM Q4 2025 |
| Healthcare / MedTech | 2.6% | n=8 | TTM Q4 2025 |
Calculate your Rule of 40 score
YoY Revenue Growth % + FCF Margin %. Negative FCF margin reduces the score.
Comparison uses the SEC-derived industry proxy shown on this page, not the separate attributed ARR-band context below.
Rule-of-40-proxy = TTM Revenue Growth % + (FCF margin % where OCF/CapEx tags are reported, else Operating margin %). Segmented by industry, not ARR band — public filers report revenue, not ARR.
| Industry segment | Median | Cohort | Vintage |
|---|---|---|---|
| Dev Tools / Infrastructure | 39.6 | n=10 | TTM Q4 2025 |
| General B2B SaaS | 44.2 | n=8 | TTM Q4 2025 |
| Security / Compliance | 40.6 | n=9 | TTM Q4 2025 |
| MarTech / Sales Tech | 33.4 | n=9 | TTM Q4 2025 |
| Vertical SaaS | 30.4 | n=10 | TTM Q4 2025 |
| Fintech / Payments | 29.5 | n=8 | TTM Q4 2025 |
| HR / Workforce | 34.9 | n=5 | TTM Q4 2025 |
| Healthcare / MedTech | 18.0 | n=8 | TTM Q4 2025 |
RevenueFromContractWithCustomerExcludingAssessedTax or ...IncludingAssessedTax (post-2018), or the older Revenues tag (pre-ASC 606, or issuers who never switched). This pipeline checks all three tags and uses whichever has data for the period — flagged here whenever a segment's cohort includes at least one company using a fallback tag.ARR-banded Rule of 40 (Bessemer / McKinsey / BVP Nasdaq Emerging Cloud Index, attributed)
| ARR Band | Growth Category | Median Score | Top Quartile | Typical Growth % | Typical FCF Margin |
|---|---|---|---|---|---|
| Under $10M ARR — R40 not primary metric at this stage; growth dominates | |||||
| Under $10M | Hyper-growth (>80% YoY) | 52 | 78 | +110% | −58% |
| Under $10M | Fast growth (40–80% YoY) | 28 | 48 | +55% | −27% |
| Under $10M | Solid growth (20–40% YoY) | 10 | 25 | +28% | −18% |
| Under $10M | Mature growth (<20% YoY) | 2 | 15 | +14% | −12% |
| $10M–$50M ARR — R40 becomes a meaningful investor signal | |||||
| $10M–$50M | Hyper-growth (>80% YoY) | 55 | 82 | +95% | −40% |
| $10M–$50M | Fast growth (40–80% YoY) | 40 | 62 | +58% | −18% |
| $10M–$50M | Solid growth (20–40% YoY) | 22 | 38 | +28% | −6% |
| $10M–$50M | Mature growth (<20% YoY) | 12 | 28 | +14% | −2% |
| $50M–$200M ARR — operating leverage begins to show; FCF margin improves | |||||
| $50M–$200M | Hyper-growth (>80% YoY) | 58 | 88 | +85% | −27% |
| $50M–$200M | Fast growth (40–80% YoY) | 45 | 68 | +52% | −7% |
| $50M–$200M | Solid growth (20–40% YoY) | 32 | 50 | +28% | +4% |
| $50M–$200M | Mature growth (<20% YoY) | 18 | 35 | +15% | +3% |
| $200M+ ARR — mature companies; FCF margin contributes meaningfully to score | |||||
| $200M+ | Hyper-growth (>80% YoY) | 68 | 96 | +82% | −14% |
| $200M+ | Fast growth (40–80% YoY) | 48 | 72 | +45% | +3% |
| $200M+ | Solid growth (20–40% YoY) | 42 | 65 | +28% | +14% |
| $200M+ | Mature growth (<20% YoY) | 30 | 50 | +14% | +16% |
Rule of 40 at different scale points
Early-stage companies (under $10M ARR) should not be judged on Rule of 40 — burning capital to grow fast is expected. The metric becomes meaningful at $10M–$50M ARR where growth curves are under investor scrutiny. McKinsey research shows Rule of 40 companies trade at roughly 2× the revenue multiple of peers below 40. Above $200M ARR, FCF margin contributes meaningfully to the score as operating leverage compounds — the best large-cap SaaS companies achieve scores of 50–70+ on the combination of solid growth and double-digit FCF margins.Looking for FP&A software to track this metric?
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