/business-health-diagnostic

name: business-health-diagnostic
argument-hint: "[metrics or business context]"
description: Diagnose SaaS business health across growth, retention, efficiency, and capital. Use when preparing a business review or prioritizing urgent fixes.
intent: >-
  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.
type: interactive
theme: finance-metrics
best_for:
  - "Getting a complete read on your SaaS business health across all dimensions"
  - "Identifying which metrics are red flags vs. leading indicators"
  - "Preparing for a board meeting or investor review"
scenarios:
  - "Our growth is strong but we're burning cash fast — I need to understand our unit economics before the board meeting"
  - "I'm preparing for a Series A board meeting and need to assess our business health across growth, retention, and efficiency"
estimated_time: "20-30 min"

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

2. **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

3. **Capital Efficiency** — Are you using cash efficiently?

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

4. **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`](../workshop-facilitation/SKILL.md) 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.

Applicat