I'd never heard of this rule, so I can't say it was planned but I've just done the maths on our startup (http://macropod.com) and we're exactly on 40%.
I certainly didn't use this equation, but our monthly expenditure is controlled quite heavily by our growth rate. So maybe there's something in that....I think I'll go work out whether this hold true for various growth rates using our method...
FWIW:
- I have a spreadsheet which maps out our revenue and expenses over the past 2 years.
- It estimates our future growth
- It combines that with our bank balance and our expenses to work out an "optimum burn rate".
- We use this number as a guide to how much we should be spending.
The "optimum burn rate" is the spend that will see us use as much of our cash as possible without us dropping below a certain threshold (which at the moment 3x our monthly burn).
I certainly didn't use this equation, but our monthly expenditure is controlled quite heavily by our growth rate. So maybe there's something in that....I think I'll go work out whether this hold true for various growth rates using our method...
FWIW:
- I have a spreadsheet which maps out our revenue and expenses over the past 2 years.
- It estimates our future growth
- It combines that with our bank balance and our expenses to work out an "optimum burn rate".
- We use this number as a guide to how much we should be spending.
The "optimum burn rate" is the spend that will see us use as much of our cash as possible without us dropping below a certain threshold (which at the moment 3x our monthly burn).