PaperclipOrg
Claude Agent Skill · by Deanpeters

Business Health Diagnostic

Install Business Health Diagnostic skill for Claude Code from deanpeters/product-manager-skills.

Works with Paperclip

How Business Health Diagnostic fits into a Paperclip company.

Business Health Diagnostic drops into any Paperclip agent that handles this kind of work. Assign it to a specialist inside a pre-configured PaperclipOrg company and the skill becomes available on every heartbeat — no prompt engineering, no tool wiring.

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SaaS FactoryPaired

Pre-configured AI company — 18 agents, 18 skills, one-time purchase.

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SKILL.md783 lines
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---name: business-health-diagnosticdescription: 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: interactivetheme: finance-metricsbest_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. ## 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. ## 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) 2. **Retention:**   - Monthly churn rate: ___%   - NRR (Net Revenue Retention): ___%   - Quick Ratio: ___ (or I can calculate it) 3. **Expansion:**   - Expansion revenue as % of total MRR: ___% 4. **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?) 2. **Value:**   - LTV (Lifetime Value): $___   - LTV:CAC ratio: ___ (or I can calculate it)   - Payback period: ___ months (or I can calculate it) 3. **Margins:**   - Gross margin: ___%   - Contribution margin (if known): ___% 4. **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) 2. **Efficiency ratios:**   - Rule of 40: ___ (Growth % + Profit Margin %) (or I can calculate it)   - Magic Number: ___ (S&M efficiency) (or I can calculate it) 3. **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 4. **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:** 1. **Overall Health Score** — Healthy / Moderate / Concerning / Critical2. **Dimension Scores** — Growth, Retention, Economics, Efficiency3. **Red Flags** — Critical, High Priority, Medium Priority4. **Prioritized Recommendations** — Top 3-5 actions with expected impact5. **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 1. **[Specific strength 1]**   - Metric: [e.g., NRR 120%]   - Why it matters: [Expanding within base without new logos] 2. **[Specific strength 2]**   - Metric: [e.g., LTV:CAC 5:1]   - Why it matters: [Sustainable unit economics support scaling] 3. **[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** 🚨1. **[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** ⚠️1. **[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:**1. **Extend runway** (if <6 months)   - Option A: Raise bridge round ($___K)   - Option B: Cut burn by ___%   - Option C: Combination   - Decision by: [Date] 2. **Stop scaling broken channels**   - Pause S&M spend on channels with LTV:CAC <2:1   - Reallocate budget to [best-performing channel] 3. **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:  1. Reduce CAC: [Specific tactics]  2. Increase LTV: [Improve retention, add expansion]- Target: LTV:CAC >2:1 within 30 days **Priority 2: Improve Retention**- Current: Churn ___% (too high)- Actions:  1. Interview churned customers (identify top 3 reasons)  2. Fix onboarding (reduce early churn)  3. 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):**1. Emergency board meeting2. Fundraise immediately OR cut burn 50%+3. Stop all non-essential spend4. 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 ### Related Skills- `saas-revenue-growth-metrics` — Detailed growth and retention metrics- `saas-economics-efficiency-metrics` — Detailed unit economics and capital efficiency- `finance-metrics-quickref` — Fast lookup for all metrics and benchmarks- `feature-investment-advisor` — Uses health diagnostic to inform feature priorities- `acquisition-channel-advisor` — Uses health diagnostic to inform channel priorities- `finance-based-pricing-advisor` — Uses health diagnostic to inform pricing decisions ### External Frameworks- **Bessemer Venture Partners:** "SaaS Metrics 2.0" — Comprehensive benchmarks- **David Skok:** "SaaS Metrics" — Unit economics benchmarks- **OpenView Partners:** SaaS benchmarking reports- **Battery Ventures:** "State of SaaS" annual report ### Provenance- Adapted from `research/finance/Finance_QuickRef.md` (Red flags table)- Decision frameworks from `research/finance/Finance_For_PMs.Putting_It_Together_Synthesis.md`- Benchmarks from `research/finance/Finance for Product Managers.md`