A successor to the Rule of 40 that weights revenue growth more heavily than profit, reflecting how much more investors value durable growth.
Rule of X score = (growth weight × revenue growth rate %) + profit margin % — with the growth weight typically around 2 to 3
A company growing ARR 30% year over year at a −5% free-cash-flow margin, using a growth weight of 2.
(2 × 30) + (−5) = 60 − 5 = 55 — a strong Rule of X score driven by growth
The Rule of X, popularised by Bessemer Venture Partners, refines the Rule of 40 by acknowledging that not all components are equal. Where the Rule of 40 adds growth and profit margin one-for-one, the Rule of X multiplies growth by a weighting — commonly around 2 to 3 — before adding profit margin, because a point of durable growth compounds and is worth far more to long-term value than a point of margin.
The reasoning is mathematical as much as philosophical. Growth compounds over time while margin does not, so two companies with the same Rule of 40 score can have very different futures: the one growing faster will be much larger in a few years. The Rule of X is designed to surface that gap, rewarding the higher-growth company even at the cost of present profitability.
There is no single canonical weighting — analysts use multipliers in the region of 2 to 3 depending on how richly they want to reward growth. As with the Rule of 40, you must state your margin basis (EBITDA or free cash flow) and your growth weight, because the score is only comparable when everyone uses the same recipe.
The Rule of X corrects the main flaw of the Rule of 40 — that it treats a point of growth and a point of profit as equally valuable when the market plainly does not. By weighting growth, it better predicts which companies will compound into the most valuable businesses, making it a sharper lens for high-growth SaaS than the flat 40 line.
There is no fixed pass mark because the score scales with the growth weight you choose. The discipline is to apply the same weighting and margin basis across a peer set; on a 2x growth weight, scores well above 40 are common for elite high-growth SaaS.
The Rule of 40 adds growth and profit margin equally. The Rule of X multiplies growth by a weighting (often 2 to 3) before adding margin, because growth compounds and is worth more to long-term value than profit.
There is no single standard — weights in the region of 2 to 3 are common, with higher weights rewarding growth more heavily. The key is to apply the same weight and the same margin basis consistently across the companies you compare.
Connect your Stripe account and see your real MRR, churn, and LTV in real time — on desktop and mobile.
No credit card required · Connect Stripe in 1 click
No credit card required. Connect Stripe in 1 click.
We're building iOS and Android apps that'll bring your metrics everywhere.
Our mobile apps are currently in active development. Follow us on social media for updates and be the first to know when they launch.