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The Rule of 40 in SAS and Its Importance for Business Growth
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The 'Rule of 40' in SAS suggests that for public market SAS companies, the sum of their operating margin and growth rate should equal or exceed 40. This rule indicates the attractiveness of a SAS business, even if it has a 20% operating margin and 20% growth rate, or a 50% growth rate with a negative 10% operating margin. It also applies to scenarios with a 30% operating margin and a 10% growth rate. The rule serves as a simple way to assess whether a business is good at scale, especially in the later growth stages where startups need to be more thoughtful about their financial metrics.
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