Stop Building “Great Little Businesses” | Rule of 40 | Ep. 1
Stop Building “Great Little Businesses” | Rule of 40 | Ep. 1
Welcome to Rule of 40 — the newsletter edition of the podcast for scale-up founders and investors who are serious about building technology companies that stand up at global scale. Each edition covers one episode: the key ideas, the moments worth remembering, and where you can listen.
What Episode 1 Is About?
Most conversations in the Australian tech ecosystem focus on the early stage. Ideas. Fundraising. Momentum. That’s not where most companies fail. They fail later. When growth needs to become repeatable. When teams need to scale. When capital needs to be deployed with discipline. In our first episode, Jason Serda and Josh Ayscough introduce the show and unpack what they call the misunderstood middle — the critical and under-discussed stage where startups must evolve into real, scalable businesses.
The Idea That Anchors
This Episode Jason introduces a concept that frames the whole conversation: the great little business. It’s the company that’s slightly profitable, paying founder salaries, not really growing — and never going to return the kind of outcomes investors or founders actually need. It looks fine from the outside. That’s what makes it dangerous. The question they keep coming back to: What are you going to do, as a founder, to make sure you don’t become one?
Three Things Worth Taking Away
- You can’t raise your way out of bad execution anymore. The era of raising capital to wipe away your sins is over. The funding environment has fundamentally shifted. Discipline, resilience, and real business fundamentals are no longer optional — they’re the baseline.
- Rule of 40 is a discipline metric, not just a performance one. Only one third of SaaS companies hit Rule of 40, and only 16% sustain it. But those that do command nearly three times the enterprise value of those that don’t. It forces a deliberate trade-off between growth and profitability — and making that trade-off consciously is the point.
- Surround yourself with the right people. No founder can do everything alone. The ones who scale are the ones who are honest about where they need help and bring the right people in for the right reasons.
Quickfire Highlights
What scaling metric do you pay attention to that most people overlook?
Jason: Build a real business. Profit needs to always be on the horizon, even if you’re under the line today.
Josh: Employee NPS. Your people are the core of everything — and the moment you have a wobble with them is usually when you can least afford it.
What advice do founders get that’s overrated?
Josh: “Build it and they will come.” A great product is essential, but it’s not enough. Customer acquisition, go-to-market, and team all have to come together. What’s one thing a founder can do tomorrow to improve execution?
Jason: Surround yourself with the right people. You can’t do this alone. Josh: Run the Rule of 40 calculation for your own business. Work out where you sit — and understand the trade-offs you’re making.
Listen to the Full Episode here: