The 40% rule is that your growth rate + your profit should add up to 40%. So, if you are growing at 20%, you should be generating a profit of 20%. If you are growing at 40%, you should be generating a 0% profit. If you are growing at 50%, you can lose 10%. If you are doing better than the 40% rule, that’s awesome.
Bred shares his thoughts on a 40% rule that works out for a healthy SaaS company. If you are having a growth of 100%, you would be experiencing a -60% in profit. But in the VC world its alright as long as you are Growing. I love the tech scene.