IFO4
Loading...A SaaS health benchmark stating that the sum of revenue growth rate and free cash flow margin should equal or exceed forty percent. Rule of 40 captures the trade-off between growth investment and profitability that the cloud public company cohort has internalised over the past decade. The federation accepts Rule of 40 as a directional benchmark rather than as a target, and requires both components to be reported on a consistent basis with the comparison period explicit under UFMS-001:3.2. Rule of 40 trends are reviewed at the annual federation accreditation cycle.
A coinage of venture capital diligence in the 2010s; the threshold was empirically derived from cloud public company performance and entered general SaaS vocabulary.
Federation members reporting Rule of 40 disclose both components on a consistent basis. The figure is published as a directional benchmark rather than as a binding target. Multi-quarter trend is reviewed at the steward tier accreditation cycle under MEV-Annex:4.1.
@misc{ifo4_glossary_rule_of_40,
title = {{Rule of 40}},
author = {{IFO4 Federation Editorial Board}},
howpublished = {{IFO4 Federation Glossary, slug \texttt{rule-of-40}}},
year = {2026},
url = {https://ifo4.org/glossary/rule-of-40},
note = {Category: Unit Economics; key: Ruleof40}
}Federation members and accredited practitioners may challenge any entry under TGS-002:1.7. Filed challenges are routed to the editorial board, triaged into the revision register, and resolved in writing on the public docket. The slug remains stable through any revision.