What Is the Rule of 50 in SaaS? A Simple Formula for Growth
Understanding the Rule of 50 in SaaS Metrics
The "Rule of 50" is a lesser-known but incredibly powerful concept in the SaaS (Software as a Service) world. It’s not as famous as the Rule of 40, but it’s just as useful — maybe even more so in high-growth environments.
So, what is it?
Simple version: The Rule of 50 says that a SaaS company’s revenue growth rate plus its EBITDA margin should total at least 50. That’s it. But don’t let the simplicity fool you — this formula packs a punch when it comes to evaluating a company’s balance between profitability and growth.
Quick example to make it real
Let’s say a SaaS startup is growing at 35% annually and has an EBITDA margin of 20%. Add them up — boom: 55. That means it’s outperforming the Rule of 50. Now imagine another one growing 60% a year but losing money with -15% EBITDA. That puts them at 45. Still not bad, but maybe less sustainable long-term.
Where the Rule of 50 Comes From
Honestly, there's no exact date when someone declared, “Let there be Rule of 50.” It kind of evolved out of investor circles, especially among VCs and private equity folks who were looking for a smarter lens than growth alone.
A cousin of the Rule of 40
Yeah, you’ve probably heard of the Rule of 40 — same idea, but a bit more conservative. That one was designed for mature SaaS companies. The Rule of 50 came along when investors started pushing for higher benchmarks in booming markets. Because let’s face it: in today’s game, just being “good enough” doesn’t cut it anymore.
Why the Rule of 50 Actually Matters
Anyone can grow fast by burning cash, right? But growing and being profitable (or at least not bleeding money) — that’s where the real skill is.
Investors love it
This rule is a quick way to weed out weak operators. If you're a SaaS founder pitching a Series B or C, and your numbers hit or beat the Rule of 50, guess what? You’ve got leverage. If you're way below? Get ready for hard questions. (“Why are you growing 20% but burning 40%? That math don’t math.”)
It keeps founders honest
We get it — chasing growth is addictive. But the Rule of 50 forces leadership to pause and ask: Is this growth efficient? Are we building something sustainable or just riding a short-term high?
Criticisms and Limits of the Rule
Okay, let’s not pretend it’s perfect. The Rule of 50 has its haters too. Or at least... skeptics.
Early-stage startups can’t always apply it
If you’re a seed-stage startup going full throttle with negative EBITDA, this rule might seem irrelevant. And yeah, for very early companies, product-market fit and user traction matter way more.
But once you’re past the scrappy beginnings and into real scaling territory, this rule becomes a damn good gut check.
It doesn’t tell the full story
Two companies might both score 50, but have totally different profiles. One could be growing slow but highly profitable. The other? Growing like wildfire but losing money. Same score — very different risk profiles.
So the Rule of 50 is more like a signal — not the whole signal.
Final Thoughts: Should You Aim for the Rule of 50?
If you're running or evaluating a SaaS company past its early days, then yeah — absolutely. The Rule of 50 is a solid north star. It encourages balance. It rewards both smart growth and smart operations.
But don’t get obsessed. It’s a guide, not gospel.
And hey, sometimes breaking the rules leads to the best breakthroughs... just know which rules you’re breaking and why.
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How tall is a average 15 year old?
Average Height to Weight for Teenage Boys - 13 to 20 Years
| Male Teens: 13 - 20 Years) | ||
|---|---|---|
| 14 Years | 112.0 lb. (50.8 kg) | 64.5" (163.8 cm) |
| 15 Years | 123.5 lb. (56.02 kg) | 67.0" (170.1 cm) |
| 16 Years | 134.0 lb. (60.78 kg) | 68.3" (173.4 cm) |
| 17 Years | 142.0 lb. (64.41 kg) | 69.0" (175.2 cm) |
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