To compare companies across all industries and countries, Upsales uses a universal metric: The 'rule of 40' or 'E40'. Common in the SaaS industry, it's a valuable KPI for comparing all companies since it provides a balanced view of two crucial business metrics.

The rule of thumb is that effective companies have an E40 above 40. The most effective companies go above 100.

Net Revenue Growth (%) + FCF Margin (Profit margin) (%)

Example:
A company has a Net revenue growth of 12% and a profit margin of 4%.
This will sum to a E40 value of 16 (12% + 4%).

This combination makes it an effective metric for several reasons:

• It creates a balanced view between growth and profitability, preventing companies from overemphasizing one at the expense of the other
• It allows for meaningful comparisons between companies of different sizes and stages
• It helps identify companies that can sustainably scale while maintaining healthy profit margins
• It's particularly useful for evaluating software and technology companies where there's often a trade-off between growth and profitability.

Learn more about E40 in the Revenue Journal's Nordic SaaS E40 Reports