Forget the old Rule of 40 in software
... the $6 trilllion industrial services market is about to be remade by the Rule of 60 through AI.
The market for professional, technical, and industrial services is 16X larger than the entire software market. But it's fragmented, margin-compressed, and stuck in a legacy service model where time equals value.
The traditional M&A playbook (financial engineering and cost-cutting) is officially outdated. The new wave is the AI-Enabled Roll-Up, pioneered by firms like General Catalyst with Marc Bhargava, which eliminates the growth vs. profitability tradeoff entirely.
The Rule of 60 Playbook: Close Look at Industrial Services
The objective is clear: 40% Profit Margins + 20%+ Annual Growth = 60+
How do you achieve this groundbreaking benchmark?
It starts by transforming traditional, non-digital industrial service businesses.
Through a strategic infusion of cutting-edge digital technology and AI, we can:
- Double Profitability to 40%: By unlocking 10-20% efficiency gains across operations.
- Drive 20%+ Annual Growth: Through superior, outcome-based service offerings.
This shift fundamentally redefines the business model, evolving it from selling labor hours to delivering automated, output-driven value.
This transformative model isn't theoretical. It's proven and rapidly scaling across parallel, people-intensive service sectors today
//Crescendo (Customer Service): Automated 80%+ of customer interactions, pushing gross margins into the 60-65% range. They now manage outcome abundance, not scarcity.
//Long Lake (Infrastructure/HOA): AI tools enable 25-30% productivity gains for team members, driving significant operating leverage and achieving the path to the Rule of 60.
//Eudia (Legal): Integrated AI with a 300+ person team to deliver complex legal outcomes as a subscription service, transforming the labor-for-time model.
//Dwelly (Property Management): Acquired 6 agencies and doubled EBITDA margins among agencies where their technology is deployed, while cutting renter repair wait times by 40%.
The $6 Trillion services economy is the next frontier.
What services do you see next to transform with AI enabled roll-ups?
Verwandte Inhalte
- LinkedInAI technology is revolutionizing the industrial sector, unlocking unprecedented economic value
- LinkedInAI is not just an enhancer; it's the new foundation of groundbreaking products
So zitieren: Szabo, Daniel (13. Oktober 2025): „Forget the old Rule of 40 in software“. szabo.digital, https://szabo.digital/beitraege/forget-the-old-rule-of-40-in-software/