Bradley Hamner explains why growth and profit pull in opposite directions. The Rule of 40 says your revenue growth rate plus profit margin should hit at least 40%, a benchmark SaaS companies use to balance speed with sustainability.
Growth doesn't equal profit. Growth eats profit. Profit and growth are— have an inverse relationship. The more you want to grow, the faster you want to grow year over year, the more that it's going to put pressure on and likely pull down profitability. And so simply put, the Rule of 40 states that in a year we want our year-over-year revenue growth percentage plus our profitability to be 40 or more.
