Business Literacy

Business Literacy

Before Starting

Check for EM context first. If .agents/em-context.md exists, read it.

If .agents/em-context.md does not exist, ask for a minimal manager profile first and save it before giving detailed advice: role/title, team size, team mission or ownership area, and current challenge or priority.

If a specific person is central to the conversation and .agents/reports/[name].md does not exist, ask for a minimal profile for that person first and save it before giving detailed advice: title/level, tenure, strengths, and current challenge or growth area.

If the conversation reveals durable new context later, update .agents/em-context.md or .agents/reports/[name].md automatically. Save stable facts and patterns, not guesses, transient frustration, or unresolved interpretations.

Response Style

Keep the first answer concise and useful. Do not dump the whole framework unless the user asks for depth.

Default to:

• State the likely diagnosis or recommendation first
• Ask at most 2-3 targeted questions only if the missing context changes the advice
• Give the next concrete action and, when useful, exact wording the manager can use
• Mention the relevant framework briefly, but do not explain every part of it
• Offer a deeper version only after the direct answer

---

How to Use This Skill

• Need to decode a business term you heard in a meeting → The Terms That Come Up Most
• Want to make the case for engineering work in business language → Using These in Practice
• Want to build credibility with business leaders or the P&L owner → The 3 Layers of Business Impact

---

Default Response Shape

When translating business concepts for an EM, make the answer operational:

1. Plain-English definition: explain the term without finance theater.
2. Why an EM should care: connect it to roadmap, staffing, reliability, cost, or prioritization.
3. Engineering translation: show how engineering work can move or protect the metric.
4. Example sentence: give wording the EM can use with a business stakeholder.
5. Caveat: note where the metric can mislead or be gamed.

For stakeholder-facing asks, end with a concise business-framed version of the engineering request.

---

Why This Matters

Engineers can succeed without understanding business language. Engineering managers cannot. If you want to have influence, convince stakeholders, and shape the roadmap — you need to speak the language leadership uses.

Understanding these terms also makes you a better advocate for your team. When you can connect engineering decisions to business outcomes — margins, retention, CAC — you move from "we need this refactor" to "this reduces our hosting cost by 15% and improves our gross margin."

---

The Terms That Come Up Most

Money In

ARR (Annual Recurring Revenue) — total yearly revenue from subscriptions. The core metric for SaaS companies. When leadership says "we're at $5M ARR," this is it.

MoM (Month-over-Month) — growth rate from one month to the next. A 10% MoM growth rate is exceptional.

TAM (Total Addressable Market) — the total revenue potential if you captured 100% of your target market. Used to justify investment size.

Costs

COGS (Cost of Goods Sold) — costs directly tied to delivering the product (hosting, infra, third-party APIs). For SaaS, engineering teams directly influence COGS.

Gross Margin — (Revenue - COGS) / Revenue. For SaaS, 70–80% is healthy. Below 60% means your delivery costs are high relative to what customers pay. This is where engineering decisions show up in financials. Reducing third-party API dependency, optimizing infra costs, or improving efficiency all improve gross margin.

OpEx (Operating Expenses) — ongoing costs not directly tied to production: salaries, rent, marketing.

CapEx (Capital Expenditure) — large investments with long-term value. Building a new data center is CapEx; monthly AWS bill is OpEx.

Burn Rate — how much cash the company spends per month. High burn + low revenue = limited runway.

Net Margin — what's left after ALL costs. Most startups have negative net margin for years.

EBITDA — Earnings Before Interest, Taxes, Depreciation, Amortization. A profitability measure that strips out financing. Matters more at late-stage.

Customers

CAC (Customer Acquisition Cost) — average cost to acquire a customer. If you spend $100k on marketing and get 100 customers, CAC = $1,000.

LTV (Lifetime Value) — average revenue from a customer over their full relationship. LTV should be 3–5x CAC for a healthy business. If not, growth is expensive.

Churn — percentage of customers lost per period. The silent killer. 5% monthly churn = ~46% of customers gone per year.

Retention — the inverse of churn. Net Revenue Retention (NRR) > 100% means expansion from existing customers outweighs churn.

GRR (Gross Revenue Retention) — what percentage of last year's revenue you kept, excluding expansion.

NPS (Net Promoter Score) — "How likely are you to recommend us?" Scores 9–10 = promoters, 7–8 = passives, 0–6 = detractors.