The concept of success is relative which makes quantifying success difficult. Especially, in view of different companies having their own yardsticks for evaluating success, establishing a standardized, homogeneous measurement system can get enormously confusing.
This issue is further exacerbated by the continuous upgrade of technology. Which makes it even more challenging to find a middle ground between what measures you need to adopt that ensure growth. At the same time paying attention to profitability.
So here comes the Rule of 40 which has gained widespread popularity in recent years. In the world of software, it has now become the standard practice of evaluating the operating performance of an organization.
The Rule of 40 establishes a new benchmark by distilling a company's growth rate and profit margin into a single number. This helps software entrepreneurs and investors to drive the company along a consistent growth path.