THE STRATEGY ENGINE: ONE-PAGE CHEAT SHEET¶

How to Use This Sheet¶

Quick Diagnosis: Start with the 10 Questions (Section 4) to rapidly assess any business. Deep Analysis: Use the Diagnostic Scorecard (Section 1) for structured evaluation. Calculate: Reference Key Formulas (Section 2) for precise metrics. Choose Tools: Consult Framework Selection Guide (Section 3) for the right analytical approach. Validate: Run through Red Flags Checklist (Section 5) before finalizing conclusions.

1. BUSINESS MODEL DIAGNOSTIC SCORECARD¶

Dimension	1 (Weak)	3 (Moderate)	5 (Strong)	Score
Revenue Model	One-time, unpredictable	Mixed recurring/transactional	80%+ recurring, diversified	/5
Unit Economics	Negative contribution margin	LTV:CAC 2-3x, breakeven ~18mo	LTV:CAC >5x, payback <6mo	/5
Competitive Moat	No differentiation, commoditized	Some switching costs or brand	Network effects + multiple moats	/5
Scalability	Linear cost growth with revenue	Some operating leverage	Near-zero marginal cost	/5
Cash Flow	Cash-burning, WC intensive	Breakeven, moderate WC needs	Cash-generative, negative WC	/5
Market Position	<5% share, fragmented market	10-20% share, clear segment	#1-2 position, >30% share	/5
Growth Trajectory	<10% YoY, declining	15-30% YoY, stable	>40% YoY, accelerating	/5

Interpretation: 28-35 = Exceptional | 21-27 = Strong | 14-20 = Average | 7-13 = Weak | Total: /35

2. KEY FORMULAS¶

Unit Economics¶

Metric	Formula	Target/Benchmark
LTV	(ARPU x Gross Margin%) / Churn Rate	Higher = better
CAC	Total S&M Cost / New Customers	Lower = better
LTV:CAC	LTV / CAC	>3:1 (ideal >5:1)
CAC Payback	CAC / (ARPU x Gross Margin%)	<12 months
Contribution Margin	Revenue - Variable Costs	>0 required

SaaS Metrics¶

Metric	Formula	Target/Benchmark
MRR	Sum(Monthly Recurring Revenue)	Growth >10% MoM early
ARR	MRR x 12	Standard annual metric
Net Revenue Retention	(Start MRR + Expansion - Contraction - Churn) / Start MRR	>100% (elite >120%)
Magic Number	Net New ARR / S&M Spend (prior Q)	>0.75 = efficient
Rule of 40	Growth Rate % + Profit Margin %	>40% = healthy

Marketplace Metrics¶

Metric	Formula	Target/Benchmark
GMV	Total Transaction Value	Growth trajectory key
Take Rate	Revenue / GMV	5-20% typical
Liquidity	Successful Matches / Total Attempts	>50% minimum
CAC Recovery	Take Rate x AOV x Frequency	<3 orders to recover

Financial Ratios¶

Metric	Formula	Target/Benchmark
Gross Margin	(Revenue - COGS) / Revenue	>70% SaaS, >40% product
Operating Margin	Operating Income / Revenue	>20% at scale
ROIC	NOPAT / Invested Capital	>WACC (>15% ideal)
Working Capital Cycle	DSO + DIO - DPO	Lower/negative = better
Sustainable Growth	ROE x Retention Rate	Max growth w/o financing
Viral Coefficient	Invites Sent x Conversion Rate	>1 = organic growth

3. FRAMEWORK SELECTION GUIDE¶

Situation	Best Framework(s)	Why This Works
New market entry	TAM/SAM/SOM + Five Forces	Quantify opportunity + understand competitive dynamics
Competitive threat	Game Theory + Disruption Analysis	Model competitor moves + identify asymmetric responses
Pricing decision	Value-Based Pricing + Elasticity	Capture fair value share + test sensitivity
Moat assessment	7 Powers + VRIO	Identify durable advantages + test sustainability
Growth strategy	Ansoff Matrix + Three Horizons + Unit Economics	Map options + balance timeframes + ensure profitability
Portfolio management	BCG Matrix + Three Horizons	Allocate capital + balance current/future businesses
Cost/scale strategy	Experience Curve + Value Chain	Leverage volume + optimize operations
Business model design	Business Model Canvas + P&L Model	Visualize value creation + validate economics
Strategic positioning	Playing to Win + Hedgehog Concept	Define coherent strategy + identify focus
Strategic focus	Hedgehog Concept + Core Competence	Clarify what to excel at + leverage capabilities
Organizational alignment	McKinsey 7-S Framework	Ensure structure/culture/systems support strategy
Strategic pivot	Blue Ocean + First Principles	Find uncontested space + rebuild from fundamentals
Investment decision	DCF + Scenario Analysis	Value outcomes + stress test assumptions
Operational efficiency	Value Chain + Benchmarking	Find leverage points + set targets
Partnership evaluation	Strategic Fit + Integration Risk	Assess synergies + identify execution challenges

4. TEN QUESTIONS TO EVALUATE ANY BUSINESS¶

#	Question	Good Answer	Bad Answer
1	What job does this solve? How painful?	Must-have solving urgent, frequent pain	Nice-to-have, infrequent need
2	How does it make money?	Clear model, multiple revenue streams	Vague monetization, ad-dependent
3	Unit economics profitable?	LTV:CAC >3x, positive contribution	Negative margins, "scale will fix it"
4	What is the moat?	Network effects, switching costs, data	"First mover" or "we work harder"
5	How does acquisition work?	Organic/viral, diversified channels	Paid-only, single channel dependent
6	What is the growth engine?	Compounding (viral, paid, sticky)	Linear, requires constant reinvestment
7	Key operating metrics?	Clear KPIs with positive trends	Vanity metrics, no cohort analysis
8	Where is cash trapped?	Negative working capital, prepaid	High inventory, slow collections
9	What could kill this?	Known risks with mitigation plans	"Nothing" or unaware of threats
10	Why now?	Tech/regulatory/behavioral shift	No clear catalyst or timing logic

5. RED FLAGS CHECKLIST¶

Unit Economics Red Flags¶

CAC increasing quarter-over-quarter without strategic reason
LTV:CAC ratio below 2:1
Negative contribution margin per transaction
Customer concentration >20% from single customer
Blended LTV masking poor cohort performance

Growth Red Flags¶

Revenue growth accompanied by margin compression
High churn (>5% monthly) masked by new acquisition
Increasing burn rate with flat or declining core metrics
Single channel dependency (>60% from one source)
"Growth" from one-time revenue or accounting changes

Competitive Red Flags¶

No clear differentiation vs. alternatives
Racing to bottom on price as primary strategy
Well-funded competitor entering core market
Regulatory uncertainty affecting business model
Key partnerships at risk or not exclusive

Financial Red Flags¶

Cash runway less than 12 months
Accounts receivable growing faster than revenue
High debt load with variable interest rates
Related party transactions or complex structures
Frequent changes in accounting methods
Deferred revenue declining relative to billings

Operational Red Flags¶

Key person dependency (founder/executive)
Technical debt limiting product velocity
Employee turnover above industry benchmarks
Customer NPS declining or below 30
Core infrastructure not scalable

QUICK REFERENCE: HEALTHY BENCHMARKS¶

Metric	Minimum Viable	Good	Excellent
LTV:CAC	>2:1	>3:1	>5:1
CAC Payback	<18 months	<12 months	<6 months
Net Revenue Retention	>90%	>100%	>120%
Gross Margin (SaaS)	>60%	>70%	>80%
Rule of 40	>20%	>40%	>60%
Monthly Churn	<5%	<3%	<1%
Magic Number	>0.5	>0.75	>1.0

From: The Strategy Engine v2.0