A SaaS business health heuristic defined as:
revenue growth rate (YoY%) + profit margin (%) ≥ 40
It is designed for growth-phase companies where the real question is whether cash burn is justified by growth rate.
It’s dimensionally incoherent because it adds two unrelated percentages with arbitrary 1:1 weighting, but it is directionally useful in the narrow band where one number (usually growth) is significantly positive and the other (profit) significantly negative.
It breaks down when growth is negative regardless of margins. In addition, “profit margin” is not standardized and is sometimes EBITDA, FCF, or operating margin.