| name | profit-leak-diagnoser |
| description | Diagnoses where a business is losing money by decomposing the profit tree and checking whether the unit economics are structurally sound. Use this skill whenever the user has a profit, margin, or profitability problem, says "our margins are shrinking", "profit is down", "we're growing but not making money", "where are we losing money", or asks whether a business actually makes money per sale. Trigger it whenever financial performance is the question, even if the user hasn't named the profitability framework. It exists to stop the reflex of cutting costs before you know which side the leak is on.
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Profit-Leak Diagnoser
The first instinct in almost any profitability conversation is to cut costs. That instinct is wrong
about half the time. Sometimes the drain is open, yes. But sometimes the tap is just running slow,
and cutting costs when the real problem is falling volume makes things worse. This skill enforces the
discipline of checking both sides before concluding anything.
The method
Profit has only two sides: revenue and cost. Isolate which side the problem is on first, then drill.
- Revenue splits into price × volume. Volume splits into customers × purchase frequency.
- Cost splits into fixed and variable. Variable splits into cost per unit × units.
Drill until you reach a hypothesis you can test. "Profit declined" is a statement. "Profit declined
because volume fell in the mid-tier cohort while fixed costs held constant" is a hypothesis worth
investigating.
Then run the unit-economics check, because a business can look fine on the tree and still be
structurally broken per transaction. Five metrics, all of them, not just the ratio:
- CAC — cost to acquire one customer.
- LTV — value of one customer over the whole relationship.
- LTV:CAC — the headline ratio; roughly 3:1 is a common health benchmark in subscription and
SaaS businesses, but healthy ratios differ by industry, margin structure, and stage, so treat it
as a heuristic, not a law.
- Payback period — how long to recover the acquisition cost.
- Contribution margin — does each transaction make money before fixed costs?
A 3:1 LTV:CAC means nothing if payback is four years. You can be structurally sound and still run out
of cash before the math works. Check all five.
Output format
- Profit tree: indented decomposition, with the suspected leak branch flagged.
- Unit-economics check: the five metrics, with whatever the user can supply and what's missing.
- Hypothesis: one testable sentence naming the likely leak and its driver.
- Fastest test: the single check that would confirm or kill the hypothesis first. (This is the
hypothesis-first-coach move; hand off to hypothesis-first-coach if the testing discipline
needs its own pass.)
How to run it
Default to producing the diagnosis: build the tree and run the check, but always show that you
looked at both revenue and cost so the reasoning is visible. Switch to coaching when the user
signals they want to think it through: ask them which side they believe the problem is on and why,
then push them to check the other side before committing.
Where this breaks
The tree assumes profit drivers are independent, but they interact: a price cut lifts volume, a
volume push can raise variable cost per unit. When drivers are clearly coupled, say so rather than
treating each branch as separate. Unit economics also assume you can cleanly attribute cost and value
per customer, which breaks in businesses with heavy shared costs or long, fuzzy customer
relationships. Flag low-confidence numbers instead of presenting them as precise.
Style
Plain language, define any metric on first use (CAC, LTV, contribution margin), no em dashes, short
paragraphs. Never open with "cut costs."
