joellewis/business-case

Overview

This skill provides a rigorous framework for building an investment thesis. It forces the identification of explicit assumptions, calculation of ROI, and the simulation of worst-case scenarios to ensure that capital and resources are allocated only to initiatives with a clear path to "Sufficiency."

Iron Law

NO BUSINESS CASE WITHOUT EXPLICIT ASSUMPTIONS AND SENSITIVITY ANALYSIS Uncertainty is inherent in business, but failing to model it is a choice. A business case that assumes a single linear outcome is a fantasy. You must simulate "The Plan Not Going According to Plan."

State Machine

digraph business_case_flow {
    "Discovery: Objectives" [shape=doublecircle];
    "Step 1: Define Sufficiency & ROI" [shape=box];
    "Step 2: Map the 5 Parts" [shape=box];
    "Gate: Viable Economics?" [shape=diamond];
    "Step 3: Sensitivity Analysis" [shape=box];
    "Step 4: Audit Opportunity Cost" [shape=box];
    "Case Approved" [shape=doublecircle];

    "Discovery: Objectives" -> "Step 1: Define Sufficiency & ROI";
    "Step 1: Define Sufficiency & ROI" -> "Step 2: Map the 5 Parts";
    "Step 2: Map the 5 Parts" -> "Gate: Viable Economics?";
    "Gate: Viable Economics?" -> "Step 3: Sensitivity Analysis" [label="viable"];
    "Gate: Viable Economics?" -> "Step 1: Define Sufficiency & ROI" [label="failed"];
    "Step 3: Sensitivity Analysis" -> "Step 4: Audit Opportunity Cost";
    "Step 4: Audit Opportunity Cost" -> "Case Approved";
}

When to Use This Skill

• When requesting additional budget or headcount.
• When evaluating a potential new market entry.
• When deciding between two competing strategic paths.
• When an existing project is underperforming and needs a "worthwhile to continue" check.

When NOT to Use This Skill

• For minor tactical experiments (use A/B testing).
• For pure brand awareness tasks where direct ROI cannot be measured.

Core Process

Step 1: Define Sufficiency & ROI

Define the exact revenue, user, or outcome level at which the initiative becomes "worthwhile to continue."

• Projected ROI: Ratio of Net Profit to Total Investment.
• Runway & Burn: Calculate the monthly cash consumption and the time remaining until the next capital event. (Source: Kaufman, Ch. 5; Feld, Ch. 3)

Step 2: Map the 5 Parts of Business

Justify how the initiative addresses:

1. Value Creation: Which Economic Values (Speed, Efficacy, Status) are we satisfying?
2. Marketing: How will we reach the 95% mainstream market, not just early adopters?
3. Sales: What is the Allowable Acquisition Cost (AAC)?
4. Value Delivery: How will we satisfy customer expectations predictably?
5. Finance: Is the Lifetime Value (LTV) greater than the AAC? (Source: Kaufman, Ch. 1; Gil, Andreessen interview)

Step 3: Sensitivity Analysis & Doomsday Scenario

Apply a "Margin of Safety."

• Sensitivity: How does ROI change if growth is 50% lower?
• Doomsday: Simulate the failure of your most critical assumption. If the company collapses because this one project fails, the risk is too high. (Source: Housel, Ch. 5; Kaufman, Ch. 7)

Step 4: Audit Opportunity Cost & Interaction

• Opportunity Cost: Explicitly list the projects that are not being done to make room for this one.
• Interaction: How does this initiative impact existing business units? (e.g., Will it cannibalize our core product?) (Source: Kaufman, Ch. 5; Bacon, Ch. 6)

Step 5: Define OKRs

Set one Objective (WHAT) and 3-5 Key Results (HOW).

• Quality Safeguard: Pair every quantitative KR (e.g., "$50M Revenue") with a quality KR (e.g., "<5% Churn") to prevent short-term reckless behavior. (Source: Doerr, Ch. 4)

Cross-Skill Invocations

REQUIRED SUB-SKILL: problem-framing — to ensure you are solving the right problem before investing. RECOMMENDED SUB-SKILL: decision-frameworks — to help weigh the subjective trade-offs identified in the audit.

Rationalization Table

| Thought | Reality | |---------|---------| | "The numbers speak for themselves." | Numbers are projections based on assumptions. The assumptions speak; the numbers just listen. | | "We've already spent $1M, we can't stop now." | Sunk cost fallacy. Only future ROI matters for the decision to continue. | | "We'll figure out the economics after we scale." | Scale without unit economics is just a faster way to go broke. | | "Our competitor is doing it, so we must too." | Social comparison leads to copying outlier behavior that may not be repeatable for you. |

Red Flags

These thoughts mean STOP — you are about to shortcut:

• "This project is 'too big to fail'" → It's actually a fragile, high-risk bet with no margin of safety.
• "We don't need unit economics yet" → You are planning a "mercenary" crash, not a "missionary" success.
• "The plan is 100% solid" → You have ignored "The Plan Not Going According to Plan."

Diagnostic Checklist

• [ ] Has a "Sufficiency" point been defined (when to stop vs. when to double down)?
• [ ] Is every output goal paired with a quality/counter-effect goal?
• [ ] Does the case include a worst-case sensitivity simulation?
• [ ] Has the opportunity cost (deferred projects) been explicitly named?
• [ ] Is the "Main Job" of the customer clearly identified as the value driver?

Sources

• Kaufman, Josh. The Personal MBA. Ch. 1, 5, 7, 11.
• Gil, Elad. High Growth Handbook. Marc Andreessen & Claire Hughes Johnson interviews.
• Doerr, John. Measure What Matters. Ch. 1, 4.
• Feld, Brad. Venture Deals. Ch. 1, 3, 4.
• Housel, Morgan. The Psychology of Money. Ch. 2, 3, 5.
• Bacon, Carl R. Practical Portfolio Performance. Ch. 1, 4, 5, 6.