What is a good EBITDA margin for a small business?

Most healthy small businesses run an EBITDA margin between 10% and 20%. Service businesses and SaaS often run higher (20–35%+), while restaurants and retail typically run 10–15%. CFO Grade compares your EBITDA margin to industry-specific benchmarks across 16 sectors.

What DSCR do lenders look for?

Most SBA and commercial lenders require a Debt Service Coverage Ratio (DSCR) of at least 1.25x. Construction surety bonds often require 1.5x or higher. A DSCR below 1.0x means your EBITDA does not cover your annual debt payments.

How does CFO Grade calculate the letter grade?

CFO Grade scores 24+ financial ratios across profitability, liquidity, leverage, and efficiency — weighted by industry. The composite score maps to a letter grade from A+ to F. The full methodology and benchmark sources are described in the report and the disclaimer page.

Yes. The full analysis, 24+ ratios, letter grade, and industry benchmarks are completely free with no signup. Optional paid features include a $9 PDF export and a $19 Pro Pass with AI-generated CFO memo and 30 days of unlimited PDFs.

Do I need to create an account?

No account is required. Your numbers stay on your device unless you explicitly opt in to anonymized peer benchmarking. Pro entitlements are bound to your device with a restore link you can email yourself.

Is CFO Grade financial advice?

No. CFO Grade provides educational insights for business owners and analysts. It is not financial, tax, legal, or investment advice. Always verify the output with a qualified professional before making business decisions.

How does CFO Grade estimate what my business is worth?

Every report includes an Enterprise Value range built from your industry's typical EV/EBITDA multiple applied to your EBITDA, adjusted for size (Duff & Phelps size-discount methodology) and quality (your CFO Grade). The paid report unlocks the lender view vs. buyer view breakdown, implied equity to owners, sensitivity analysis, and full source-cited methodology. The dedicated valuation calculator lives at /valuation with industry-specific pages for 11 sectors.

Why does my business valuation change when I rerun the report?

The range moves with three things: your EBITDA (the biggest driver), your revenue size band (which sets the size discount), and your CFO Grade quality factor. When you run a second report in a later period, the Enterprise Value delta is shown prominently — 'You built $220,000 of value since Q3' or 'You lost $180,000 this quarter' — so you can watch the number that actually matters to lenders and buyers over time.

Benchmark · SaaS & software

What's a healthy rule of 40 for saas & software?

Short answer

For saas & software, a healthy rule of 40 is around ≥ 40. It's the range most lenders, acquirers, and consultants use as the "healthy" band for saas & software.

Real peer data

Community median publishes once we have 5+ anonymous submissions from saas & software. Currently at 0. Run your numbers below to help build it — your ratios are shared, your business name and dollar amounts are not.

Formula

Rule of 40 = Revenue Growth Rate (%) + EBITDA Margin (%)

Add your year-over-year revenue growth percentage to your EBITDA margin percentage. The sum should be ≥ 40.

Why rule of 40 matters for saas & software

The Rule of 40 is the canonical SaaS efficiency benchmark — invented by Brad Feld and SaaStr. It captures the trade-off between growth and profitability. Either grow fast or be profitable; you don't need both, but you need their sum to clear 40.

Understanding your rule of 40 in the context of saas & software lets you see whether you're mid-pack, exceptional, or at risk — before your bank or accountant tells you.

Common questions about rule of 40 for saas & software

What is a good rule of 40 for saas & software?+

For saas & software, a healthy rule of 40 is around ≥ 40. The exact number depends on scale, region, and business model, but this is the range most banks, acquirers, and industry consultants treat as "healthy."

How is Rule of 40 calculated?+

Add your year-over-year revenue growth percentage to your EBITDA margin percentage. The sum should be ≥ 40.

Why does rule of 40 matter more for saas & software?+

Rule of 40 is one of the top metrics used to underwrite saas & software. Lenders, buyers, and even landlords tend to check it before signing anything.

What's the fastest way to improve my rule of 40?+

Run your numbers through CFO Grade — the free memo pinpoints the two or three levers that move rule of 40 fastest for a business your size, in your industry. Common fixes for saas & software include pricing, cost discipline, and cash-cycle tightening in that order..

See your rule of 40 — graded against saas & software peers.

Paste your P&L. CFO Grade computes this — plus 23 other ratios — in seconds, with the saas & software benchmark already loaded.

Other saas & software benchmarks

Gross Margin

Target: 70–85%

Burn Multiple (Startups)

Target: < 1.5×

Runway (Startups)

Target: ≥ 18

All benchmarks for this industry

SaaS & software financial health hub

Every metric that matters for saas & software — margins, coverage, efficiency — with plain-English explanations.

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