David Cummings, Founder of the Atlanta Tech Village and also Founder and Chief Executive Officer of Atlanta Ventures, writes about the “Rule of 40” in one of his latest blogs. It is a score that combines growth rate and profit margin.
“We add growth rate and profit margin together, with a target of 40 or higher,” Cummings writes, noting, “The challenge in start-up land today is that too many start-ups have a ‘Rule of 40’ score well below 40, with some even having a negative score. To get to a score of 40, or higher, many of these start-ups are laying off employees to cut expenses to reduce their losses and improve their margins. For all start-ups, cost cutting is the fastest way to improve the ‘Rule of 40’ score.”
His blogpost can be found here.