The Four Branching Questions
Decision framework for evaluating whether to branch into a new business unit, geography, or product line.
Decision framework for evaluating whether to branch into a new business unit, geography, or product line. Based on biological principles of apical dominance and resource allocation in plants.
When to Use The Four Branching Questions
Before any significant expansion decision: new business unit, geographic market, product line, or acquisition. Use to prevent branching from weakness and ensure disciplined growth.
How to Apply
Is the trunk strong?
Measure trunk strength using quantitative metrics. Only branch from strength, never to escape weakness.
Questions to Ask
- Is revenue growth >10% annually for 3+ years?
- Is operating margin >20% (or industry-competitive)?
- Is customer retention >90% annually?
- Is market share stable or growing?
- Is team attrition <15%?
Outputs
- Trunk strength score (use Trunk Strength Scorecard)
- Go/No-Go on branching readiness
Is resource allocation clear?
Define explicit resource commitments before branching. If you can't answer 'What % goes to this branch?' with a number, you're not ready.
Questions to Ask
- How much capital allocated to new branch (% of total, absolute $)?
- What's the hurdle rate (IRR >X%, payback <Y years)?
- What resources from trunk can branch use (sales, manufacturing, brand)?
- What resources must branch build independently?
Outputs
- Capital allocation %
- Hurdle rate targets
- Shared vs. dedicated resource map
Is the branch independently viable?
Determine if branch could operate as standalone business. If it requires trunk integration to survive, it's a feature not a branch.
Questions to Ask
- Would customers buy from this business with a different name?
- Could it raise capital independently if needed?
- Does it have clear P&L?
- Can it make decisions without constant HQ approval?
Outputs
- Constellation Test result (Would someone buy this for $20M as standalone?)
- Independence assessment
What's the pruning trigger?
Define exit criteria before entering. Without defined triggers, you'll hold dead branches too long or prune arbitrarily.
Questions to Ask
- At what point do we prune (3 years unprofitable? Revenue decline >20%? Margin <10%)?
- How much will we invest before pruning ($10M? $50M?)?
- What's the divestment plan (Sell? Shut down? Merge back to trunk)?
Outputs
- Explicit pruning triggers
- Maximum investment threshold
- Exit plan