| name | business-fundamentals |
| description | Master business domain knowledge - understand business models, unit economics, revenue mechanisms, metrics, profitability, financial analysis. Use for evaluating business cases, prioritizing features by business value, and understanding financial impact. |
| allowed-tools | Write |
| metadata | {"version":"2.0","claude-code":{"context":"fork","agent":"Explore","user-invocable":true}} |
Business Fundamentals for BA
Every requirement has business impact. Understand the math.
What is Business Domain Knowledge?
Definition: Understanding how the business makes money, generates value, and measures success - the financial and operational foundations.
Why it matters:
- Bad prioritization: Build features nobody will pay for
- Missed opportunities: Don't recognize high-value features
- Weak business cases: Can't justify investment to executives
- Wrong metrics: Measuring vanity metrics, not real impact
When to Use:
- ✅ Evaluating business case for initiative
- ✅ Prioritizing features by business value
- ✅ Understanding customer economics
- ✅ Analyzing financial impact
- ✅ Setting success metrics tied to business
3 Core Business Model Concepts
1. How Does the Company Make Money?
Different business models, different priorities:
Subscription/SaaS:
- Key metric: MRR (Monthly Recurring Revenue)
- Priorities: Reduce churn, increase ARPU (Average Revenue Per User)
- Customer lifetime value matters more than acquisition cost
Transactional (Marketplace):
- Key metric: GMV (Gross Merchandise Volume)
- Priorities: Increase transaction volume, take rate
- Liquidity (supply + demand) matters most
Freemium:
- Key metric: Conversion rate (Free → Paid)
- Priorities: Maximize free user base, conversion funnel
- Balance: Too aggressive → low adoption, Too passive → no revenue
Advertising:
- Key metric: CPM (Cost Per Mille), CTR (Click-Through Rate)
- Priorities: Maximize time-on-site, ad placements
- User experience vs ad density trade-off
See: references/business-models.md
2. Unit Economics (The Math That Matters)
Every business needs this math to work:
For SaaS Business:
Customer Acquisition Cost (CAC): $500
= Sales + Marketing spend / New customers
Monthly Subscription Price: $100
Gross Margin: 80%
= Revenue - COGS / Revenue
Monthly Churn Rate: 5%
= (Customers lost / Starting customers) / Month
Lifetime Value (LTV): $1,600
= (Monthly Price × Gross Margin) / Monthly Churn
LTV/CAC Ratio: 3.2
= $1,600 / $500
Rule of Thumb: LTV/CAC should be ≥ 3
Status: ✓ Unit economics work!
3. Business Metrics vs Vanity Metrics
Not all numbers matter equally.
VANITY METRICS (Make you feel good, don't drive decisions):
❌ Total users (if they're inactive)
❌ Downloads (if mostly one-time)
❌ Page views (if low engagement)
❌ Revenue (if losing money)
ACTIONABLE METRICS (Drive decisions and behavior):
✅ Daily active users (engagement)
✅ Customer retention rate (satisfaction)
✅ Feature adoption rate (value delivery)
✅ Customer acquisition cost (efficiency)
✅ Gross profit (sustainability)
✅ Customer lifetime value (long-term value)
5 Key Business Concepts BA Must Know
1. Value Proposition
Why would customers choose you?
Framework:
TARGET CUSTOMER:
- Who specifically? (not "everyone")
- What's their problem?
- Why do they care?
YOUR SOLUTION:
- How do you solve it?
- Why better than alternatives?
- What's unique?
ECONOMIC VALUE:
- How much time/cost do you save?
- How much more money do they make?
- What's it worth to them?
EXAMPLE:
Target: Marketing managers managing 5+ campaigns
Problem: Spending 20+ hours/week on manual reporting
Your solution: Automated reporting dashboard
Value: Saves 15 hours/week = $1,500/month (at $100/hr)
2. Total Addressable Market (TAM)
How big is the opportunity?
TAM ESTIMATION (Top-Down):
- Total market: "How many companies worldwide?"
- Industry data: "Average spend on our category"
- TAM = Total companies × Avg spend
Example: HR Analytics
- Companies worldwide: 5M
- Spend on HR analytics: $10K/year average
- TAM = $50 Billion
Does it justify your business?
- If 1% market share = $500M revenue = worth pursuing
- If max is 0.01% = $5M = riskier bet
See: references/market-sizing.md
3. Competitive Positioning
Why would customers choose you vs competitors?
POSITIONING QUADRANT:
PREMIUM
|
HIGH QUALITY | ● Us
| ○ Competitor A
────────────────┼──────────────── PRICE
LOW QUALITY | ○ Competitor B
|
BUDGET
Questions:
- Where are we positioned? (High quality/price? Low quality/price?)
- Is that sustainable? (Can we compete there?)
- How do we differentiate? (Not just cheaper copy)
4. Customer Economics
Understanding your customer's business:
If customers are Enterprise Companies:
├─ What drives their revenue? (Products/Services)
├─ What are major costs? (Salaries, infrastructure)
├─ What's their profit margin? (Revenue minus costs)
├─ How do we improve their business?
│ └─ Increase revenue? (Sell more)
│ └─ Reduce costs? (Save money)
│ └─ Reduce risk? (Avoid losses)
└─ What's it worth to them? (Quantify impact)
└─ "You save $100K/year" = Max price ~$30K/year
5. Financial Sustainability
Can this business survive?
UNIT ECONOMICS MUST WORK:
├─ Gross Margin > 50% (ideally >70%)
│ └─ Revenue - Cost of Goods Sold / Revenue
│ └─ For SaaS: hosting, support, payment processing
│
├─ CAC Payback < 12 months
│ └─ How long until customer value pays for acquisition?
│ └─ If CAC=$1000, Monthly margin=$200, payback = 5 months ✓
│
├─ Positive LTV/CAC (ideally > 3)
│ └─ Customer lifetime value should be 3x acquisition cost
│ └─ Ensures business is profitable
│
└─ Path to profitability clear
└─ How do we get from current to sustainable?
└─ At what revenue/user base do we break even?
How BA Uses Business Knowledge
Scenario 1: Prioritizing Features
Feature A: Saves users 1 hour/week
Impact: Improves engagement, reduces churn 2%
Business value: $100K/year (at current LTV)
Effort: 2 weeks
ROI: $100K / (2 weeks × engineer salary) = High
Feature B: Requested by early adopters
Impact: Improves engagement for 5% of users
Business value: $5K/year
Effort: 3 weeks
ROI: $5K / (3 weeks × engineer salary) = Low
Decision: Build A first, B second
Scenario 2: Evaluating New Business
Should we build premium tier at $500/month?
Current: 1,000 users at $100/month = $100K MRR
Projected: 10% convert to premium = 100 premium users
Premium revenue: 100 × $500 = $50K MRR
Premium churn: +2% higher (riskier, more demanding)
Impact: $50K more revenue, but higher support cost (+$5K/month)
Net: +$45K MRR
Effort: 4 weeks
Decision: Worth doing
Tools & Templates
- 📋 Business Case Template:
assets/business-case-template.md
- 📋 Unit Economics Calculator:
assets/unit-economics-calculator.md
- 📋 TAM Analysis Worksheet:
assets/tam-analysis-worksheet.md
- 📋 Feature Value Assessment:
assets/feature-value-template.md
- 📋 Financial Impact Template:
assets/financial-impact-template.md
Usage Examples
/business-fundamentals "SaaS B2B" "Trying to understand why feature A matters more than B"
/business-fundamentals "Marketplace" "Evaluating pricing strategy impact on GMV"
/business-fundamentals "Freemium" "Should we restrict free tier to improve conversion?"
BA Standards & References
Based on:
- Financial Analysis: Understanding business metrics and unit economics
- Business Strategy: Business models and competitive positioning
- Product Management: Feature prioritization by business value
- Startup Finance: Metrics that matter for sustainability
Detailed Frameworks:
- 📚
references/business-models.md - SaaS, marketplace, freemium, advertising models
- 📚
references/unit-economics.md - CAC, LTV, gross margin, payback period
- 📚
references/market-sizing.md - TAM, SAM, SOM calculation methods
- 📚
references/financial-impact.md - Quantifying business impact of features
- 📚
references/competitive-positioning.md - Differentiation and competitive strategy
