Business Health Diagnostic

Purpose

Diagnose overall SaaS business health by analyzing growth, retention, unit economics, and capital efficiency metrics together. Use this to identify problems early, prioritize actions by urgency, and deliver a comprehensive health scorecard for board meetings, quarterly reviews, or fundraising preparation.

This is not a single-metric check—it's a holistic diagnostic that connects revenue, retention, economics, and efficiency to reveal systemic issues and opportunities.

Input

Works best with: Whatever business metrics you have access to — growth rate, NRR/GRR, CAC payback, burn multiple, runway. Partial data is fine; the diagnostic flags what's missing. Also useful: The occasion (board meeting, quarterly review, fundraise prep) and what you already suspect is wrong.

Anything supplied with the invocation itself — text after the skill name, a pasted context dump, or an appended ARGUMENTS: line — counts as answers already given. Use it and skip whatever it covers; don't re-ask.

Arriving empty-handed? That works too. The diagnostic opens by asking your company stage and which metric families you can pull.

Example invocation: Run a health check: $8M ARR, 60% YoY growth, NRR 96%, CAC payback 21 months, 14 months runway — board meeting in 3 weeks.

Key Concepts

The Business Health Framework

A SaaS business is healthy when four dimensions work together:

1. Growth & Retention — Are you growing and keeping customers?

• Revenue growth rate
• NRR (Net Revenue Retention)
• Churn rate
• Quick Ratio

1. Unit Economics — Is the business model profitable at the customer level?

• CAC (Customer Acquisition Cost)
• LTV (Lifetime Value)
• LTV:CAC ratio
• Payback period
• Gross margin

1. Capital Efficiency — Are you using cash efficiently?

• Burn rate
• Runway
• Rule of 40
• Magic Number

1. Strategic Position — Are you positioned for sustainable success?

• Market positioning (below, at, above market pricing)
• Competitive moat (network effects, data, brand)
• Revenue concentration risk
• Operating leverage

Stage-Specific Benchmarks

Early Stage (Pre-$10M ARR):

• Focus: Product-market fit, unit economics
• Growth: >50% YoY
• LTV:CAC: >3:1
• Gross Margin: >70%
• Runway: >12 months
• Acceptable: Negative margins, high burn (if unit economics work)

Growth Stage ($10M-$50M ARR):

• Focus: Scaling efficiently
• Growth: >40% YoY
• NRR: >100%
• Rule of 40: >40
• Magic Number: >0.75
• Acceptable: Moderate burn if growth is strong

Scale Stage ($50M+ ARR):

• Focus: Profitability, efficiency
• Growth: >25% YoY
• NRR: >110%
• Rule of 40: >40
• Profit Margin: >10%
• Required: Positive or near-positive cash flow

Red Flag Categories

Critical (Fix immediately):

• Runway <6 months
• LTV:CAC <1.5:1
• Churn accelerating cohort-over-cohort
• NRR <90%
• Magic Number <0.3

High Priority (Fix within quarter):

• Rule of 40 <25
• Payback >24 months
• Quick Ratio <2
• Gross margin <60%
• Revenue concentration >50% in top 10 customers

Medium Priority (Address within 6 months):

• NRR 90-100% (flat, not growing)
• Magic Number 0.3-0.5
• Operating leverage negative
• Churn rate stable but high (>5% monthly)

Anti-Patterns (What This Is NOT)

• Not a single metric: "Revenue is growing 50%, we're great!" (ignoring burn, churn, unit economics)
• Not stage-agnostic: Early-stage burn is acceptable; scale-stage burn is a problem
• Not static: Health is directional—are metrics improving or degrading?
• Not just numbers: Context matters (competitive pressure, market changes, team capacity)

When to Use This Framework

Use this when:

• Preparing for board meetings or investor updates
• Quarterly business reviews (QBR)
• Fundraising preparation (know your numbers)
• Annual planning (identify improvement areas)
• You suspect problems but can't pinpoint them
• New PM/exec joining and needs health assessment

Don't use this when:

• You're pre-revenue (focus on product-market fit first)
• You're in pure research mode (not enough data)
• You need tactical guidance (use specific skills: feature, channel, pricing)

Facilitation Source of Truth

Use `workshop-facilitation` as the default interaction protocol for this skill.

It defines:

• session heads-up + entry mode (Guided, Context dump, Best guess)
• one-question turns with plain-language prompts
• progress labels (for example, Context Qx/8 and Scoring Qx/5)
• interruption handling and pause/resume behavior
• numbered recommendations at decision points
• quick-select numbered response options for regular questions (include Other (specify) when useful)

This file defines the domain-specific assessment content. If there is a conflict, follow this file's domain logic.

Application

This interactive skill asks up to 4 adaptive questions, then delivers a comprehensive diagnostic with prioritized recommendations.

Step 0: Gather Context

Agent asks:

"Let's diagnose your business health. I'll need metrics across four dimensions: growth, retention, unit economics, and capital efficiency.

Company context:

• Stage: (Pre-$10M ARR, $10M-$50M ARR, $50M+ ARR)
• Business model: (PLG, sales-led, hybrid)
• Target market: (SMB, mid-market, enterprise, mixed)

Why this matters: Benchmarks vary by stage. Early-stage optimizes for growth; scale-stage optimizes for efficiency.

Please provide the following metrics. Use 'unknown' if you don't have a metric."

Step 1: Growth & Retention Metrics

Agent asks:

"Growth & Retention:

1. Revenue:

• Current MRR or ARR: $___
• Revenue growth rate: ___% (MoM or YoY)

1. Retention:

• Monthly churn rate: ___%
• NRR (Net Revenue Retention): ___%
• Quick Ratio: ___ (or I can calculate it)

1. Expansion:

• Expansion revenue as % of total MRR: ___%

1. Cohort trends:

• Are recent cohorts retaining better or worse than older cohorts?

1. Better (improving)
2. Same (stable)
3. Worse (degrading)
4. Unknown"

Based on answers, agent evaluates:

• ✅ Healthy growth: Growth >40% YoY (growth stage) or >25% (scale stage)
• ✅ Healthy retention: NRR >100%, churn <5% monthly, Quick Ratio >2
• 🚨 Growth problems: Growth <20% YoY
• 🚨 Retention problems: NRR <100%, churn >5%, cohort degradation

Step 2: Unit Economics Metrics

Agent asks:

"Unit Economics:

1. Acquisition:

• CAC (Customer Acquisition Cost): $___
• Blended or by channel? (If by channel, what's your best channel CAC?)

1. Value:

• LTV (Lifetime Value): $___
• LTV:CAC ratio: ___ (or I can calculate it)
• Payback period: ___ months (or I can calculate it)

1. Margins:

• Gross margin: ___%
• Contribution margin (if known): ___%

1. Trends:

• Is CAC increasing, stable, or decreasing over time?

1. Decreasing (improving efficiency)
2. Stable
3. Increasing (diminishing returns)
4. Unknown"

Based on answers, agent evaluates:

• ✅ Healthy economics: LTV:CAC >3:1, payback <12 months, gross margin >70%
• ⚠️ Marginal economics: LTV:CAC 2-3:1, payback 12-18 months
• 🚨 Poor economics: LTV:CAC <2:1, payback >24 months, gross margin <60%

Step 3: Capital Efficiency Metrics

Agent asks:

"Capital Efficiency:

1. Cash:

• Cash balance: $___
• Monthly net burn rate: $___
• Runway: ___ months (or I can calculate it)

1. Efficiency ratios:

• Rule of 40: ___ (Growth % + Profit Margin %) (or I can calculate it)
• Magic Number: ___ (S&M efficiency) (or I can calculate it)

1. Operating expenses:

• S&M as % of revenue: ___%
• R&D as % of revenue: ___%
• Is OpEx growing faster than revenue?

1. No (positive operating leverage)
2. Yes (negative operating leverage)
3. Unknown

1. Profitability: