Growing 37.1 per cent while losing 5 scores 32.1. Below the bar, and exactly the conversation the board should be having
Rule of 40 Calculator
Growth rate plus profit margin against the forty bar, on an EBITDA or free cash flow basis, so the board argues about the trade-off, not the arithmetic.
Rule of 40 Calculator
Growth plus profitability, the trade-off in one number, with which margin you used stated on the answer.
Reading the score honestly
The rule: growth rate plus profit margin should clear 40. It exists to stop growth-at-any-cost and profitable-but-dying being argued past each other; one number prices the trade.
State the margin basis. EBITDA and free cash flow can differ by the whole score for an annual-billed company, because deferred income makes cash arrive before revenue.
The demo scores 32.1: 37.1 per cent growth minus a 5 per cent EBITDA investment. Under 40 with strong retention and short payback is a company choosing growth, not failing at it. The score starts the conversation, it does not finish it.
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The score in Excel with growth computed from your own ARR pair and both margin bases side by side.
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