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title: Tracking Rule of 40
description: Alten Capital invests in exceptional management teams to accelerate high-growth technology services businesses.
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[Alten Capital](https://alten.capital/blog/author/alten)  July 3, 2025

# Tracking Rule of 40

We’ve written about the Rule of 40 in technology services ([https://alten.capital/blog/rule-of-40-in-services-the-2024-view](https://alten.capital/blog/rule-of-40-in-services-the-2024-view) and [https://alten.capital/blog/applying-the-rule-of-40-to-tech-services](https://alten.capital/blog/applying-the-rule-of-40-to-tech-services)). We’ll discuss the merits of tracking this metric frequently.

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In summary, the Rule of 40 is a metric derived from adding revenue growth and EBITDA margin. This quick heuristic helps decision-makers interpret where the business stands in terms of growth and profitability. It is such a powerful metric that keeping close tabs on it can help managers take prompt actions to impact business performance.

Early Detection of Performance Shifts: Monthly tracking enables managers to identify trends before they become significant issues.

Better Cashflow Management: Balancing the growth-profitability tradeoff can yield additional visibility into the company’s free cash flow.

Improved Investor Communication: Monthly tracking enables more nuanced explanations of performance trends.

Annual Rule of 40 example chart is below:

![rule-40-annual](https://alten.capital/hs-fs/hubfs/rule-40-annual.png?width=624&height=269&name=rule-40-annual.png)

Rolling LTM Rule of 40 metric to compare:

![rule-40-monthly](https://alten.capital/hs-fs/hubfs/rule-40-monthly.png?width=900&height=178&name=rule-40-monthly.png)

Alten Capital invests in technology services businesses. Please reach out to explore potential partnerships.

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We invest in exceptional management teams to accelerate high-growth technology services businesses.

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