Matryoshka-Paradigms/business-frameworks

Business Frameworks

Operating judgement for running a business, distilled for agents. Query it like a consultant, pay per answer.

Scope: built for businesses from launch to about $50M in revenue; larger businesses are product two.

One document, written by an operator, for an agent that is running a business — and for an agent advising the human who does. It is structured so an agent reads the free top layer here and pays only for the node it needs; every leg ends in decision nodes (inputs, rule, action, check) an agent can execute. The top layer is on this card in full; every deeper node has a handle and a price at the endpoint below.

Provenance

Self-captured and original: every sentence is the author's own synthesis. Published works the author drew on are cited by author and year under the claims that rest on them and are never sold; only the author's own material sits behind a paid handle. Rights are clean and declared. Nothing here was scraped.

Author

Written by Joseph McHenry — an operator, not a content farm. Background for anyone who wants to check it: https://www.linkedin.com/in/josephmchenry/. (No revenue, headcount or valuation figures for any employer appear in this document or on the profile, by policy.)

How to use it

1. Read Layer 0 and Layer 1 below. Free.
2. Every claim names the handle one level deeper: business-frameworks/<path>@<version>. Paths descend one branch at a time — an agent that only needs cost of capital runs risk → risk/band/sub-5m and never pays for the other three terms.
3. Call the endpoint with the handle. The response carries the price and the payment instruction in the request/response headers (x402, USDC on Base, no account, no negotiation). Pay, receive the node. https://business-frameworks.matryoshka-paradigms.workers.dev
4. A machine-readable catalogue of every handle, its token size and its price is at handles.json in this repo and at https://business-frameworks.matryoshka-paradigms.workers.dev/catalogue.
5. Every decision node can also be applied to your own numbers: POST the inputs (schema free at https://business-frameworks.matryoshka-paradigms.workers.dev/apply) and the response returns the decision worked — the figures, the verdict, the action and the check — together with the node text. The rule is applied exactly as the node states it; no model sits in between.

Prices are per node and are listed in the catalogue, not here, so the card never goes stale.

Layer 0 — the equation

handle business-frameworks/equation@1.0 · budget 240 tokens

V = CF / (r − g)

Long-term shareholder value equals annual cash flow divided by the cost of capital less the long-term growth rate. This is the Gordon growth formula — the value of a stream that grows at one constant rate forever — applied to a whole business rather than to a dividend. Nothing about the form is new; what is new is using it as the single objective every operating decision resolves against.

Honest limit: the equation is meant to be the most concise representation of the agent's decision framework; it allows the initial tradeoff gradients in cash flow, risk, and growth to be quantified with minimal tokens. Refinement, i.e. more precise response can be done by leveraging depth and breadth of the project's knowledge base at the cost of additional tokens. g here is the rate cash flow can grow at forever, which must be smaller than r and is always modest. The five-year revenue forecast and the pro formas that produce a real number live deeper (growth/forecast, cash-flow/pro-forma). Use the equation to rank decisions; use the forecast to price one.

Layer 1 — the four terms

1. Value (V)

handle business-frameworks/value@1.0 · budget 210 tokens · deeper: value/15s, value/why, value/band/sub-1m

Value is what the business's future cash is worth today to an owner who has other places to put the money. A business creates value only when the return on the capital inside it exceeds what that capital could earn elsewhere at the same risk; it conserves value when the two are equal, and destroys value when it earns less — even while reporting a profit. Success is defined against that comparison, never against effort, revenue, or headcount.

Cites (public): Bruner, R., Applied Mergers and Acquisitions, Wiley, 2004, ch. 3 ("Does M&A Pay?").

Scale band · sub-$1M: below about $1M the business and the owner are not yet separable in economic terms: value is the owner's future cash, and a buyer will pay for it only to the degree it runs without the owner. Staying owner-run is generally right at this size; a separate legal entity is a different question, and may be advisable so that the business's liabilities stop there rather than at the owner's personal assets. Whether the venture is a short-lived opportunity or a durable strategic position decides which case you are in.

2. Cash flow (CF)

handle business-frameworks/cash-flow@1.0 · budget 210 tokens · deeper: cash-flow/why, cash-flow/band/sub-1m, cash-flow/band/1-5m, cash-flow/pro-forma

Cash flow is the cash the business generates after everything required to keep it running at its present scale: operating profit after tax, plus charges that never left the bank, minus the capital spending and the working capital that operations tie up. Profit is not cash. A growing business can report profit and run out of money, because inventory and receivables absorb cash before customers pay. Getting this number right moves value more than any refinement of the discount rate.

Cites (public): Churchill, N. and Mullins, J., "How Fast Can Your Company Afford to Grow?", Harvard Business Review, May 2001; Ruback, R., "Capital Cash Flows: A Simple Approach to Valuing Risky Cash Flows", Financial Management, Summer 2002.

Scale band · sub-$1M: the cash flow that matters is what remains after the owner is paid a market wage for the work they do; a tax return's "profit" is not the number. Scale band · $1–5M: the operating cash cycle — days of inventory plus days of receivables less days of supplier credit — becomes the dominant term; every dollar of sales growth ties up a known number of cents for a known number of days.

3. Risk (r)

handle business-frameworks/risk@1.0 · budget 210 tokens · deeper: risk/why, risk/band/sub-5m, risk/band/5-50m

r is the return the owner's capital could earn elsewhere at the same risk — the price of the money, not a feeling about danger. Markets pay only for risk that cannot be diversified away; the standard estimate is a risk-free rate plus a premium scaled by how much the business moves with the economy. For a diversified investor that is the number. For an owner whose wealth is concentrated in one business, it is a floor: the true hurdle is higher, and the gap is the price of not diversifying.

Scale band · sub-$5M: at this size the discount rate is mostly a probability of survival, not a market beta. A "venture rate" of 50% is a success probability disguised as a discount rate; separate the two, estimate the probability, and discount the successful case at an ordinary rate.

4. Growth (g)

handle business-frameworks/growth@1.0 · budget 210 tokens · deeper: growth/why, growth/forecast, growth/self-financeable, growth/band/25-50m

g is the long-term rate at which cash flow grows. Growth adds value only when the capital it consumes earns more than r; growth bought with capital that earns less subtracts value while revenue rises. The growth a business can fund from its own revenue has a ceiling set by three things: how long cash is tied up per cycle, how many cents each sales dollar ties up, and how many cents each sales dollar generates. Margin is the strongest lever on that ceiling.

Cites (public): Churchill, N. and Mullins, J., "How Fast Can Your Company Afford to Grow?", Harvard Business Review, May 2001; Zook, C. and Allen, J., Profit from the Core, Harvard Business Press, 2010, ch. 2; Zook, C. and Allen, J., "Growth Outside the Core", Harvard Business Review, December 2003; Zook, C. and Allen, J., Profit from the Core, Harvard Business Press, 2010, ch. 3.

Scale band · $25–50M: the ceiling stops being cash and becomes management span and the core's reach; adjacency moves are where value is most often destroyed at this size, and the discipline is to add only what the core's customers or capabilities already touch.

The fifteen-second definition of long-term shareholder value

handle business-frameworks/value/15s@1.0 · budget 100 tokens

Long-term shareholder value is the present worth of all the cash the business will ever hand its owner, judged against what that money could earn at equal risk somewhere else. It rises when cash flow rises, when risk falls, and when growth that beats the cost of capital lasts longer. It falls when growth is bought with capital that earns less than it costs — which is the usual way a growing business quietly gets poorer.

What is behind the handles

Each Layer 1 term descends by weight: the why behind the term, then where the answer changes by scale band (sub-$1M, $1–5M, $5–25M, $25–50M), then the operating decisions the term settles. Truncate anywhere and what you have is accurate, only coarser; deeper nodes refine, they never revise.

Versioning

Only the current version is published. Handles carry a version field from day one (@1.0) so a citation made today still resolves tomorrow.