Three-Way Trade-Off Diagnostic
Diagnostic framework for classifying expenses and mapping current allocation across survival (operations), growth (investment), and profitability (returns).
Diagnostic framework for classifying expenses and mapping current allocation across survival (operations), growth (investment), and profitability (returns). Includes classification decision tree, stage-appropriate benchmarks, and 4-week implementation guide for conducting first energy audit.
When to Use Three-Way Trade-Off Diagnostic
Use quarterly to assess current allocation, diagnose mismatches between allocation and environment, and plan reallocation. Essential when preparing for funding rounds, responding to market shifts, or evaluating strategic priorities.
How to Apply
Classify Every Expense
Apply decision tree: Survival = company dies in 90 days without this (minimum payroll, essential infrastructure, critical support, compliance). Growth = buying future revenue/scale (new products, hiring beyond skeleton crew, marketing, expansion). Profitability = improves unit economics or returns cash (efficiency projects, retained earnings, debt paydown).
Questions to Ask
- Would company die in 90 days without this?
- Is this building something that doesn't exist yet?
- Does this make existing business more profitable?
Handle Ambiguous Cases
Split ambiguous expenses by activity: Customer Success (retention→Survival, expansion→Growth), Engineering (maintenance→Survival, new features→Growth, optimization→Profitability), Sales (renewals→Survival, new customers→Growth)
Outputs
- Complete expense classification
Diagnose Environment
Assess mortality level: High (volatile market, intense competition, narrow window), Moderate (growing market, established position, medium runway), Low (stable market, dominant position, long runway)
Outputs
- Environment classification
- Required allocation percentages
Calculate Gap and Reallocate
Compare current vs. required allocation. If mismatched, create 90-day transition plan: Month 1 cancel lowest-priority projects (10-15% cut), Month 2 reallocate headcount, Month 3 implement new allocation.
Outputs
- Gap analysis
- 90-day reallocation plan
- Cut priorities