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. Key Concepts The Business Health Framework A SaaS business is healthy when four dimensions work together: Growth & Retention — Are you growing and keeping customers? Revenue growth rate NRR (Net Revenue Retention) Churn rate Quick Ratio 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 Capital Efficiency — Are you using cash efficiently? Burn rate Runway Rule of 40 Magic Number 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: Revenue: Current MRR or ARR: $ Revenue growth rate: % (MoM or YoY) Retention: Monthly churn rate: % NRR (Net Revenue Retention): % Quick Ratio: ___ (or I can calculate it) Expansion: Expansion revenue as % of total MRR: % Cohort trends: Are recent cohorts retaining better or worse than older cohorts? Better (improving) Same (stable) Worse (degrading) 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: Acquisition: CAC (Customer Acquisition Cost): $ Blended or by channel? (If by channel, what's your best channel CAC?) Value: LTV (Lifetime Value): $ LTV:CAC ratio: ___ (or I can calculate it) Payback period: ___ months (or I can calculate it) Margins: Gross margin: % Contribution margin (if known): % Trends: Is CAC increasing, stable, or decreasing over time? Decreasing (improving efficiency) Stable Increasing (diminishing returns) 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: Cash: Cash balance: $ Monthly net burn rate: $ Runway: ___ months (or I can calculate it) Efficiency ratios: Rule of 40: ___ (Growth % + Profit Margin %) (or I can calculate it) Magic Number: ___ (S&M efficiency) (or I can calculate it) Operating expenses: S&M as % of revenue: % R&D as % of revenue: % Is OpEx growing faster than revenue? No (positive operating leverage) Yes (negative operating leverage) Unknown Profitability: Profit margin: % Path to profitability: (already profitable, 6-12 months, 12-24 months, >24 months, unknown)" Based on answers, agent evaluates: ✅ Healthy efficiency: Rule of 40 >40, magic number >0.75, runway >12 months ⚠️ Acceptable efficiency: Rule of 40 25-40, magic number 0.5-0.75, runway 6-12 months 🚨 Poor efficiency: Rule of 40 <25, magic number <0.5, runway <6 months Step 4: Deliver Comprehensive Diagnostic Agent synthesizes all metrics and delivers: Overall Health Score — Healthy / Moderate / Concerning / Critical Dimension Scores — Growth, Retention, Economics, Efficiency Red Flags — Critical, High Priority, Medium Priority Prioritized Recommendations — Top 3-5 actions with expected impact Stage-Appropriate Benchmarks — How you compare to peers Diagnostic Pattern 1: Healthy Business When: Growth, retention, economics, and efficiency all meet stage-appropriate benchmarks No critical red flags Improving trends Output: "## ✅ Overall Health: Healthy Your business shows strong fundamentals across all dimensions. Health Scorecard Dimension Score Status Growth & Retention ✅ Healthy Growth % YoY, NRR %, Churn % Unit Economics ✅ Healthy LTV:CAC :1, Payback ___ months Capital Efficiency ✅ Healthy Rule of 40: , Runway ___ months Overall ✅ Healthy Strong position for scaling Key Strengths [Specific strength 1] Metric: [e.g., NRR 120%] Why it matters: [Expanding within base without new logos] [Specific strength 2] Metric: [e.g., LTV:CAC 5:1] Why it matters: [Sustainable unit economics support scaling] [Specific strength 3] Metric: [e.g., Rule of 40 = 65] Why it matters: [Excellent balance of growth and efficiency] Opportunities for Optimization Even healthy businesses can improve. Here are your top opportunities: 1. [Opportunity 1] Current: [e.g., Magic Number 0.9] Opportunity: [Could scale S&M spend 2x and maintain efficiency] Impact: [+$ MRR/month] 2. [Opportunity 2] Current: [e.g., Expansion revenue 15% of total] Opportunity: [Build upsell paths, target 25% expansion revenue] Impact: [NRR 110% → 120%] 3. [Opportunity 3] Current: [e.g., CAC $500, stable] Opportunity: [Improve conversion, reduce CAC to $400] Impact: [Faster payback, better LTV:CAC] Recommended Actions (Next Quarter) Priority 1: Scale what's working [e.g., Double content marketing budget (best channel)] Expected impact: [+ customers/month, +$ MRR] Priority 2: Expand within base [e.g., Launch premium tier for 20% of customers] Expected impact: [NRR 110% → 115%] Priority 3: Improve efficiency [e.g., Optimize paid acquisition (reduce CAC 10%)] Expected impact: [Payback 8mo → 7mo] Monitor These Metrics Weekly: NRR (should stay >%) Churn rate (should stay <%) Quick Ratio (should stay >) Monthly: Rule of 40 (should stay >) Magic Number (should stay >) LTV:CAC (should stay >:1) Quarterly: Cohort retention trends Revenue concentration risk Operating leverage Benchmarks (Your Stage: [Growth/Scale]) Metric Your Performance Benchmark Status Growth Rate ___%
40% (growth) / >25% (scale) ✅ NRR % 100% ✅ LTV:CAC :1 3:1 ✅ Rule of 40
40 ✅ Gross Margin % 70% ✅ You're performing at or above benchmarks across the board." Diagnostic Pattern 2: Moderate Health (Fixable Issues) When: Most metrics acceptable, but 1-2 dimensions have problems Medium-priority red flags Solvable with focus Output: "## ⚠️ Overall Health: Moderate (Fixable Issues) Your business has good fundamentals but needs attention in [specific dimension]. Health Scorecard Dimension Score Status Growth & Retention [✅ / ⚠️ / 🚨] [Details] Unit Economics [✅ / ⚠️ / 🚨] [Details] Capital Efficiency [✅ / ⚠️ / 🚨] [Details] Overall ⚠️ Moderate [Primary issue area] needs attention Red Flags Identified High Priority 🚨 [Specific red flag] Metric: [e.g., NRR 95%] Threshold: [Should be >100%] Impact: [Base is contracting, not expanding] Fix by: [End of quarter] Medium Priority ⚠️ [Specific issue] Metric: [e.g., Magic Number 0.6] Threshold: [Should be >0.75] Impact: [S&M spend moderately efficient, room for improvement] Fix by: [6 months] Root Cause Analysis Primary Issue: [e.g., Retention & Expansion] Symptoms: NRR 95% (should be >100%) Churn rate 5% monthly (should be <3%) Expansion revenue only 10% of MRR (should be 20-30%) Diagnosis: [e.g., Customers are churning before they expand. Onboarding is weak, no clear upsell paths.] Impact: Lost MRR: [Calculate churn impact] Missed expansion: [Calculate expansion opportunity] Total impact: [Combined revenue loss] Prioritized Action Plan Immediate (Next 30 days): 1. Fix [Primary Issue] Action: [Specific step, e.g., "Launch onboarding improvement program"] Owner: [PM, Customer Success] Target: [Reduce churn 5% → 4%] Impact: [Save $K MRR/month] Short-term (Next Quarter): 2. [Secondary Action] Action: [e.g., "Build premium tier for upsell"] Target: [NRR 95% → 105%] Impact: [+$K expansion MRR] 3. [Tertiary Action] Action: [e.g., "Optimize S&M spend, improve magic number"] Target: [Magic Number 0.6 → 0.8] Impact: [More efficient growth] What Success Looks Like (90 Days) Target metrics: NRR: 95% → 105% (+10pp) Churn: 5% → 3.5% (-30%) Magic Number: 0.6 → 0.8 (+33%) Impact: Monthly revenue saved from churn: +$K Expansion revenue: +$K More efficient S&M: [details] If you hit these targets, you'll be in 'Healthy' territory. Monitor Weekly Must-track metrics: Churn rate (track to ensure it's decreasing) NRR (track to ensure it's improving) Customer feedback (are improvements working?) Leading indicators: Onboarding completion rate Time-to-value Usage metrics (activation, engagement) What Not to Do Don't: Scale acquisition until retention is fixed (you'll just churn faster) Ignore expansion (it's easier than new acquisition) Wait too long (retention problems compound)" Diagnostic Pattern 3: Concerning Health (Urgent Action Required) When: Multiple critical red flags 2+ dimensions problematic Requires immediate intervention Output: "## 🚨 Overall Health: Concerning (Urgent Action Required) Your business has multiple critical issues that need immediate attention. Health Scorecard Dimension Score Status Growth & Retention 🚨 Concerning [Details] Unit Economics 🚨 Concerning [Details] Capital Efficiency 🚨 Critical [Details] Overall 🚨 Concerning Multiple urgent issues Critical Red Flags 🚨 1. [Critical Issue 1 - e.g., Runway] Current: [6 months runway] Threshold: [<6 months = crisis] Impact: [Survival risk] Action: [Raise capital OR cut burn immediately] Timeline: [30 days] 2. [Critical Issue 2 - e.g., Unit Economics] Current: [LTV:CAC 1.2:1] Threshold: [<1.5:1 = unsustainable] Impact: [Losing money on every customer] Action: [Reduce CAC OR increase LTV] Timeline: [60 days] 3. [Critical Issue 3 - e.g., Cohort Degradation] Current: [Newer cohorts churning 2x faster than old] Threshold: [Degrading PMF] Impact: [Scaling makes problem worse] Action: [Stop scaling, fix retention] Timeline: [90 days] Survival Plan (Next 90 Days) Week 1-2: Triage Immediate actions: Extend runway (if <6 months) Option A: Raise bridge round ($K) Option B: Cut burn by % Option C: Combination Decision by: [Date] Stop scaling broken channels Pause S&M spend on channels with LTV:CAC <2:1 Reallocate budget to [best-performing channel] Assemble crisis team Daily standups on key metrics Weekly progress reviews Month 1: Stop the Bleeding Priority 1: Fix Unit Economics Current: LTV:CAC :1 (unsustainable) Actions: Reduce CAC: [Specific tactics] Increase LTV: [Improve retention, add expansion] Target: LTV:CAC >2:1 within 30 days Priority 2: Improve Retention Current: Churn % (too high) Actions: Interview churned customers (identify top 3 reasons) Fix onboarding (reduce early churn) Proactive outreach to at-risk accounts Target: Reduce churn by 20% within 30 days Month 2-3: Stabilize Milestone 1: Positive Unit Economics LTV:CAC >2:1 ✅ Payback <18 months ✅ Gross margin >60% ✅ Milestone 2: Slowing Churn Churn decreasing month-over-month Cohort degradation stopped NRR improving toward 100% Milestone 3: Runway Extended 12+ months runway (via fundraise or burn reduction) Clear path to next milestone What Success Looks Like (Day 90) Metrics: Runway: ___ months → 12+ months ✅ LTV:CAC: :1 → >2:1 ✅ Churn: % → reduced by 30% ✅ NRR: % → improving toward 100% Position: Out of crisis mode Stable foundation to rebuild growth Clear plan for next 6-12 months What to Avoid Don't: Try to grow your way out of this (fix unit economics first) Ignore the data (hope is not a strategy) Scale before you fix retention (accelerates failure) Wait until runway <3 months to fundraise (too late) Do: Focus ruthlessly on retention and unit economics Cut costs to extend runway Be honest with board/investors about problems Move fast (you don't have time to waste)" Diagnostic Pattern 4: Critical Health (Existential Crisis) When: Runway <3 months OR Multiple critical failures (LTV:CAC <1:1, massive churn, no path to profitability) Output: "## 🚨🚨 Overall Health: Critical (Existential Crisis) Your business is in survival mode. Immediate drastic action required. [Similar structure to Pattern 3, but more urgent tone, shorter timelines, more drastic measures] Immediate Actions (This Week): Emergency board meeting Fundraise immediately OR cut burn 50%+ Stop all non-essential spend Fix top 1-2 critical issues (runway, unit economics)" Examples See examples/ folder. Mini examples below: Example 1: Healthy Growth-Stage SaaS Metrics: ARR: $20M, Growth: 60% YoY NRR: 115%, Churn: 2.5% LTV:CAC: 4:1, Payback: 10 months Rule of 40: 50, Runway: 18 months Diagnosis: Healthy. Scale aggressively. Example 2: Moderate Health (Retention Issue) Metrics: ARR: $15M, Growth: 40% YoY NRR: 95%, Churn: 5% LTV:CAC: 3.5:1, Payback: 12 months Rule of 40: 38, Runway: 12 months Diagnosis: Moderate. Fix retention before scaling further. Example 3: Concerning (Multiple Issues) Metrics: ARR: $8M, Growth: 25% YoY (slowing) NRR: 88%, Churn: 7% (increasing) LTV:CAC: 1.8:1, Payback: 20 months Rule of 40: 15, Runway: 8 months Diagnosis: Concerning. Urgent action on retention and unit economics required. Common Pitfalls Pitfall 1: Celebrating Single Metrics Symptom: "Revenue growing 50%!" (ignoring burn, churn, unit economics) Consequence: Unsustainable growth. Scaling broken model. Fix: Look at all four dimensions together. Pitfall 2: Ignoring Stage-Specific Benchmarks Symptom: "We're not profitable yet, is that bad?" (early-stage company) Consequence: Misplaced worry. Early-stage should optimize for growth and unit economics, not profitability. Fix: Use stage-appropriate benchmarks. Pitfall 3: Focusing on Lagging Indicators Only Symptom: "Churn is 5%, let's watch it" Consequence: By the time lagging indicators (churn, NRR) show problems, it's late. Fix: Track leading indicators (usage, engagement, onboarding completion). Pitfall 4: Not Acting on Red Flags Symptom: "NRR <100% for 3 quarters, but we'll fix it eventually" Consequence: Problems compound. Becomes crisis. Fix: Set clear timelines. If metric doesn't improve in X time, escalate. Pitfall 5: Trying to Fix Everything at Once Symptom: "Let's improve growth, retention, CAC, and efficiency simultaneously" Consequence: Resources spread thin. Nothing improves. Fix: Prioritize top 1-3 issues. Fix sequentially. References