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This is how CFOs calculate the Rule of 40 (Important for Valuation).

The Financial Controller

12,339 views

In this video, I break down how CFOs evaluate business growth using two critical metrics: revenue growth rate and net profit margin. We walk through a real example to calculate both, then combine them using the Rule of 40—a framework CFOs and investors use to assess valuation, efficiency, and long-term potential. You’ll learn why growth is about speed, margins are about efficiency, and how pricing, sustainability of demand, cost structure, and financing decisions all shape these numbers. If you want to think like a CFO and understand how growth is really evaluated, this video is for you.

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Download the PDF summary mentioned in the video:
https://thefincontroller.com/p/revenu...

Chapters:
00:00 Intro & Example
01:04 The Rule of 40
01:50 Comparison of the metrics
06:20 CFO Insight
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18 Comments

@spiritofclay3758 8 months ago

Love the whiteboard stuff, it really helps to give a big picture.

@rodctenis 8 months ago

Great video again, I like the whiteboard effect, it looks scary, but then helps a lot to follow the narrative. I don't miss your videos.

@MM-pe9ik 3 months ago

Love your videos! Very helpful

@Amir-ih8tl 4 months ago

I love your whiteboard and you explain financial topics very well and simply

@Harshpatel-kd8dp 8 months ago

Hey Bill,
Just jumped back as soon as saw your new video thumbnail.
Keep educating ❤❤

@moayadomar1955 8 months ago

You are great sir.. love how you simplify these concepts …

@bodin6969 8 months ago

Firt comment!! Thank you sir! Big fan from Thailand ❤

@AlalmeaAlhadeta 8 months ago

keep going you are best of the best

@tsoyfamily5617 8 months ago

Thank you!

@kieranproven4874 8 months ago

Cheers mate, very helpful. Very easy to understand. You put a lot of time and work into distilling your knowledge in a digestible form.

@Aghl9 8 months ago

Growth isn’t just about making more money; it’s about how you make it. CFOs look at how fast revenue is growing and how much of that revenue actually turns into profit. When you put those two together using the Rule of 40, you get a clear picture of whether a company is growing in a healthy, sustainable way or just burning cash. It’s a simple way to see if growth is real, efficient, and built to last.

@anjohsamuel9061 5 months ago

You are the best 🎉

@thekitchenhostage 4 months ago (edited)

Simply the best. The whiteboard content is excellent: clear, engaging, and easy to follow.
REQUEST: In future videos, could you step away from the whiteboard for a couple of seconds to allow us to take a clean screenshot.
The PDF summary is very useful, but the whiteboard's colour combo and presentation make the concepts much easier to remember and help the content really stick.
Great work and, thank you.

@akankwatsaracheal1885 7 months ago

Thank you Sir. where does the "rule of 40" originate. why 40? Thank you

@FullFathomV 8 months ago

Thanks for this. Q: I've always thought of the Rule of 40 as being more of a SaaS-centered metric, with EBITDA not NI as the preferred profit margin used, am I wrong?