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S41

Rule of 40 Shortfall

Margin / base / 6 to 12 months

What it detects

A recurring-revenue business is buying neither growth nor profit: the sum of its year-over-year revenue growth rate and its EBITDA margin sits materially below the published [redacted] line.

Severity levels

  • MEDIUM
  • HIGH

Thresholds

  • RULE_OF_40_FIRE_SCORE
  • RULE_OF_40_HEALTHY_SCORE
  • RULE_OF_40_HIGH_SCORE
  • RULE_OF_40_RECURRING_SHARE_MIN

Exact thresholds, formulas, and severity bands are omitted from this public view. The full methodology, with every figure, is available in the authenticated app.

When this signal does not apply

This signal applies only to recurring-revenue businesses with the income-statement history needed to read growth and profitability together. A services or project company, or a book missing that history, is reported as not applicable rather than scored against a benchmark built for a different model.

How it connects

The [redacted] leg is the binding one at [redacted]%. Recovering the score means moving that leg [redacted] points[redacted].

Sources

  • Brad Feld
  • Bessemer Venture Partners
  • McKinsey & Company

SEE IT ON REAL NUMBERS

The exact thresholds, the formula, and your own figures are in the authenticated app. See it against a real, simulated dataset for Integra Executive Services, our public demo company, or connect your own QuickBooks Online account.

Get accessSee the nightly proof