The three-lever test.

When I sit down with a founder for the first time, step into a new operating role, or look at a company I might want to back, I usually find myself coming back to the same three questions.

Do they have the right people in the right seats, do they have enough process to make the business honest and repeatable, and do they have a product or offer that customers actually care about?

That is the framework, people, process, and product.

It is not especially complicated, which is part of why I like it. Most business problems eventually roll up into one of those three categories, even if they show up under different names. A revenue problem might actually be a people problem because the wrong person owns sales. A margin problem might be a process problem because handoffs are broken. A growth problem might be a product problem because the offer is not sharp enough for the market to understand.

But those three levers cannot be looked at in isolation, because at the end of the day, the business has to work economically.

That is where the P&L comes in.

If revenue is not growing, something is usually off in the product, the go-to-market motion, or the team responsible for creating demand and closing it. If margin is compressing, there may be a pricing issue, a delivery issue, a labor issue, or a process issue hiding in the seams. If revenue is growing but cash is getting tighter, the business may have a working capital problem, a cost discipline problem, or a leadership team that is confusing activity with healthy growth.

The P&L does not tell you the whole story, but it tells you where to start asking better questions.

The hard part is not naming the categories, it is being honest about which one is actually causing the pain.

I usually look at them in this order, people first, then process, then product, all while paying attention to how each one shows up in the P&L. Not because product matters less, because in many companies the product or offer is the whole game, but because the people determine how fixable everything else is. A strong team can usually work its way through a messy process, a confusing offer, or a product that needs to get sharper, while the wrong team tends to turn every problem into a slower, more expensive version of itself.

So I start with the humans.

§Would you hire this team again?

The first question I ask is simple, and it usually tells me more than people expect.

If you were starting over tomorrow, knowing what you know now, would you hire the same people into the same seats?

That is different from asking whether people are working hard, whether they are loyal, whether they are well-liked, or whether they have been around since the early days. Those things can matter, but they are not the question. The question is whether the team you have today is the team you would intentionally build for the business you are trying to become.

Most leaders know the answer faster than they want to admit. There are usually one or two seats they have been quietly tolerating, someone who was right for an earlier stage but not this one, someone who creates work for everyone around them, someone who is good in theory but not effective in practice, or someone whose role has been protected by ambiguity for too long.

That does not mean you treat people harshly. It means you tell the truth sooner, because dragging out a mismatch is rarely kind to the person, the team, or the business.

I have seen companies lose months because everyone knew a role was wrong, but no one wanted to say it directly. The team worked around the problem, meetings got slower, strong people quietly absorbed the extra weight, and the leader waited for things to "play out," which they usually did, just not in the direction anyone wanted.

The people lever is also about how decisions get made, because healthy teams make clear decisions even when the decision itself is hard. They may argue, they may pressure test, and they may disagree in the room, but someone owns the call, the team knows what was decided, and people leave with the same understanding of what happens next.

Unhealthy teams create fog. Decisions get revisited three times, nobody knows who owns the next step, people walk out with slightly different versions of what happened, and the team can feel busy while the business is barely moving.

I also pay attention to who is leaving, because average turnover can hide the real issue. The better question is whether the people you most need are still choosing to stay. Strong people will tolerate hard seasons, messy systems, imperfect compensation, and a lot of pressure, but they usually will not tolerate being surrounded by people who do not carry weight for very long.

When the best people start quietly checking out, I do not read that as a retention issue first. I read it as a leadership issue.

The P&L shows this too.

A weak leadership team usually shows up somewhere in the numbers, even if the issue is not obvious at first. Revenue slows because the sales motion is not owned well. Gross margin slips because delivery is messy. Cost creeps because no one has real accountability. Customer experience suffers because the wrong person owns the handoff between sales and operations.

If the people lever is off, I would rather deal with it directly than dress it up as a strategy problem. Strategy will not save a team that cannot make decisions, hold standards, tell the truth, or put the right people in the right seats.

§Do we have enough structure to stay honest?

Process gets misunderstood in both directions. Some teams reject it because they think process is what slow companies do when they are no longer hungry, while other teams overcorrect and build a calendar full of meetings, dashboards, templates, and rituals that no one can clearly explain.

I do not think healthy process needs to be heavy. In most companies, if I were rebuilding the operating rhythm from scratch, I would start with a small number of things and try to make those things actually work.

The first is a weekly operating meeting where the team looks at the same numbers together, not a status meeting where everyone performs busyness, and not a round-robin where each function gives an update that may or may not matter, but a real operating conversation around the handful of numbers that tell you whether the business is healthy.

The second is a monthly or quarterly review where the team steps back and asks whether the plan still makes sense. This is where you look at the customer, the market, the financial model, the team, and the strategy, not so you can produce a beautiful deck, but so you can notice drift before it gets expensive.

The third is one source of truth for the core numbers, which sounds basic until you sit in a room where finance has one revenue number, marketing has another, sales has a different pipeline number, and operations is making decisions from a fourth version of reality. At that point, the company is not really debating strategy, it is debating reality, and no amount of meeting discipline can fix that until the numbers are defined.

Pick the source, define the metric, and make everyone use it. One number for revenue, one number for pipeline, one number for retention, one number for gross margin, one number for CAC, one number for contribution margin, and one agreed-upon place where those answers live. The exact system matters less than the agreement, because the business needs a shared reality before it can have a useful conversation.

The other place process breaks is at the seams between functions.

Most teams are at least decent inside their own function. Marketing knows what marketing is doing, sales knows what sales is doing, operations knows what operations is doing, and finance knows what finance is doing. The problems usually happen in the handoff, when marketing hands a lead to sales, sales hands a customer to operations, operations hands data back to finance, and finance hands insight back to leadership.

That is where work gets lost, expectations get fuzzy, and customers feel the gaps that the org chart hides.

If you cannot draw the handoff on a whiteboard in five minutes, there is a good chance the team cannot execute it cleanly either. Who owns the next step, what triggers the handoff, where does the information live, what happens when something breaks, and how does the team know whether the handoff is actually working?

The P&L usually makes the leakage visible.

Bad process shows up as rework, discounting, missed follow-up, slow collections, overstaffing, unclear ownership, low conversion, margin drag, and expensive customer issues that should have been prevented earlier. The company may still be growing, but it is paying too much for the growth because the operating system is leaking value at every handoff.

Good process should make the business easier to run. If the process only adds meetings, creates more places for information to hide, or gives the team new language without changing behavior, it is probably not process yet. It is clutter.

§Does the thing we sell actually make the customer better?

I use the word product broadly.

For a software company, it may be the actual product and user experience. For a service business, it may be the offer, the delivery model, the pricing, and the customer journey. For a marketplace, it may be the quality of the match, the trust in the network, and whether both sides have a reason to come back.

The question underneath is the same, does this meaningfully improve the customer's life, business, or outcome?

A lot of companies sell something useful, but fewer sell something necessary enough that the customer behavior becomes obvious. Do customers come back, do they expand, do they refer other people, do they complain when the product changes, and would they feel real pain if it went away?

That last question is helpful, although I would not use it by itself, because some products are not daily-use products, some services are high-trust but low-frequency, and some offers solve a very specific problem at a very specific moment. What I care about is whether the customer's behavior matches the story the company tells about the product.

Customers may say they love something, but do they keep using it? They may say it is valuable, but do they pay for it? They may say they would refer it, but do they actually make the introduction? The best read on product is rarely what people say when they are trying to be helpful in a customer interview, it is what they do when they have other options.

The most common product problem I see is lack of focus.

A company starts with a clear promise, then customers ask for things, sales asks for things, a big account asks for something, a competitor launches something, and slowly the roadmap becomes a collection of everyone else's anxiety. The offer gets harder to explain, the product gets less opinionated, and the team starts building for everyone, which usually means they are building for no one in particular.

A good product or offer needs a point of view.

What are the one or two things you do meaningfully better than anyone else? Who is the customer you are most built to serve? What should you say no to, even if someone is willing to pay for it?

Those questions are uncomfortable because they force tradeoffs, but without tradeoffs the product gets blurry. When the product gets blurry, sales gets harder, marketing gets softer, and the team starts mistaking motion for progress.

The P&L helps separate a product people like from a product that actually works as a business.

A strong product creates pricing power, retention, expansion, referral, efficient acquisition, or some combination of those things. A weak product often requires too much sales effort, too much discounting, too much support, or too much custom work to keep customers happy. The product may still generate revenue, but the revenue comes with too much drag.

That is why I do not only ask whether customers like the product. I ask whether the product makes the business easier to grow profitably.

A clear product makes the rest of the business easier. The pitch gets clearer, the roadmap gets shorter, the customer understands why you exist, and the team has a better filter for what to build next.

§The P&L: where the levers show up.

The P&L is not a separate operating lever in the same way people, process, and product are. It is the place where the consequences of those levers become visible.

Revenue tells you whether the market understands the offer, whether demand is being created, and whether the sales motion is working.

Gross margin tells you whether the product or service is priced correctly, delivered efficiently, and supported by the right operating model.

Operating expenses tell you whether the company is investing with discipline or simply adding cost around unclear priorities.

Contribution margin tells you whether growth is healthy at the unit level or whether the company is buying revenue that does not really make sense.

Cash flow tells you whether the timing of the business works, not just whether the income statement looks good.

That is why I like to look at the P&L alongside the three levers. It keeps the conversation honest.

A team can tell a good story about culture, but the P&L may show that no one owns cost. A company can talk about process, but the P&L may show margin leakage that keeps getting explained away. A product can look exciting, but the P&L may show that it only works when acquisition is cheap, labor is underpaid, or customers are overserviced.

The P&L is not perfect, and it will not tell you everything, but it is hard to hide from for long.

§What this framework does not solve.

This framework is not a full company diagnosis, and I would not pretend that it answers every important question.

It does not tell you whether the market is large enough, whether the timing is right, whether the category is attractive, whether distribution will be cheap or painful, or whether the business model has enough margin to support the company you want to build.

Those things matter a lot.

A company can have strong people, clean process, and a solid product, and still be fighting in a bad market. A company can also be sitting in a great market and waste the opportunity because the team cannot focus, the operating rhythm is messy, the product is not clear enough to win, or the economics do not support the growth plan.

The three-lever test is not meant to answer everything. It is meant to give me a fast read on whether the company is capable of improving.

Can the team see clearly, can they make decisions, can they operate with discipline, can they build something customers want more of, and can they turn that into healthy economics?

If the answer is yes, most problems are workable. If the answer is no, the business may still survive for a while, but it will be harder than it needs to be.

§How to use it.

When I use this framework, I try not to fix all three levers at once, because that usually creates more noise than progress.

The better move is to find the weakest lever, understand how it is showing up in the P&L, and spend the next ninety days there.

If it is people, get honest about the team, clarify the seats, upgrade where needed, and have the conversations that have been hanging over the business for too long.

If it is process, simplify the operating rhythm, define the core numbers, clean up the handoffs, and remove meetings that do not change behavior.

If it is product, sharpen the promise, study what customers actually do, cut the roadmap down to what matters, and build around the customers who already show you where the value is.

If it is the P&L, do not treat the numbers like an accounting exercise. Use them to find the operating issue underneath. Revenue, margin, cost, and cash are rarely just finance problems, they are usually people, process, or product problems with numbers attached.

Then come back and run the test again, because the team that was right last year may not be right now, the process that worked at ten people may break at forty, the product that felt sharp in the beginning may get dull as the market moves, and the P&L that looked healthy at one stage may not support the next one.

That is why I like the framework. It is not a one-time exercise, it is a way to keep paying attention.