Business Lunch Podcast Episode Summary

Episode: Defining the Health of Your Business
Release Date: February 26, 2026
Host: Roland Frasier
Guest Host: Ryan Deiss

Episode Overview

In this “snackable” episode of Business Lunch, Roland Frasier and Ryan Deiss dig into a deceptively simple yet profound question: What is the single best metric for measuring the health of your business? The discussion takes listeners on a thoughtful exploration of different financial and operational metrics, weighing their pros and cons, and ultimately landing on nuanced answers that reflect the complexity of running and evaluating successful businesses.

Key Discussion Points and Insights

The Foundational Question: What Is a Healthy Business Metric?

• Origin of the Question:
  Roland recounts an AMA session with the Founders Board where a member asked, “What do you believe is the number one business health metric?”

  “It’s rare that people ask me a question where I just don’t have some kind of answer… But I’d never been asked this question before, and I didn’t have a good answer.” — Roland Frasier (02:17)

Exploring Common Metrics

• Net Promoter Score (NPS):
  Roland’s first instinct was NPS—how likely customers are to recommend your product or service. While valuable, he notes it’s “easy to game” and narrowly focused on customer perception, missing other key aspects.
• Revenue or Profit per Employee:
  Explored as indicators of efficiency, but again acknowledged as limited because high revenue doesn’t always equal high health if profitability is lacking.

The Complexity of a Single Metric

• “There probably isn’t one. It’s going to be a combination of things.” — Roland Frasier (08:02)
• Both hosts agree that no single metric perfectly encapsulates business health but acknowledge the exercise’s value in surfacing what truly matters.

Deep Dive: The Hosts’ Top Metrics

Ryan Deiss: Compound Annual Growth Rate of Profit (CAGR)

• Rationale:
  Trend-focused rather than a static snapshot, reflecting consistent, repeatable growth over several years.

  “I would like compound annual growth rate of profitability because it’ll tell me that this is a company that over several years has been able to continue to be in business and earn a profit at a higher rate and over time.” — Ryan Deiss (06:12)

• Explanation:
  Looks at the rate at which profit (EBITDA or Seller Discretionary Earnings) grows annually, compounded over time (07:09).

Roland Frasier: Distributable Cash

• Rationale:
  Focuses on the free cash that could be distributed as dividends/distributions without harming the business’s ongoing growth or R&D needs.

  “I was thinking just distributable cash... how much cash could we distribute in the form of dividends, distributions, whatever you want to call it, and still maintain a solid growth rate...” — Roland Frasier (08:50)

• Why Not Just Profit?
  Profit can be obscured by reinvestment or non-core experiments. Distributable cash demonstrates actual business output and operational health (09:47).
• Calculation Nuance:
  Includes true free cash flow, but allows for some flexibility to back out once-off “flyer” investments (11:44).

Practical Context: Metrics and Business Models

• Growth vs. Value Philosophy:
  They discuss different mindsets:
  • Growth-focused entrepreneurs often reinvest everything, sometimes at the expense of personal or business sustainability.
  • Value-focused entrepreneurs may prioritize healthy, regular distributions to reduce risk and maintain long-term viability.
• Dividend Stocks Analogy:
  Roland references old investment wisdom that companies increasing dividends over time outperform the market (13:15). Ryan wonders if this still holds in today’s trillion-dollar tech world, inviting further reflection (16:21).
• Scalable vs. Growable:

  “Any company is growable. But you may not be scalable, because scale is going to require that pesky profit and fuel, cash fuel at some point.” — Roland Frasier (19:19)

Notable Quotes & Memorable Moments

• On the Limits of Popular Metrics:

  “If you want to game it, you can game it…It should be something that isn’t easy to game.” — Roland Frasier on NPS (03:33)

• Snapshot Versus Trends:

  “Where you stand right now today might be radically changed tomorrow... a recent case in point would be the FTX exchange that was worth, I think, $34 billion one day, and listed as a dollar the next.” — Ryan Deiss (15:03)

• Profitability Over Growth:

  “Don’t focus on growth as much right now... if you grow, you might grow yourself into oblivion. Let’s focus on profitability for a season.” — Roland Frasier (00:00, repeated at 18:37)

Timestamps for Important Segments

• 01:55 — The “number one health metric” question emerges
• 03:33 — Roland’s first thoughts: NPS, Revenue/Profit per Employee
• 06:12 — Ryan lays out the compound annual growth rate of profit concept
• 08:50 — Roland introduces “distributable cash”
• 11:44 — How to calculate distributable cash
• 13:15 — Analogy with dividend-yielding stocks and business health
• 16:21 — Discussion on value versus growth in modern markets
• 18:13 — Why entrepreneurs must adopt investor mindsets
• 19:19 — Growth vs. scalability: a company needs cash fuel

Key Takeaways

• There is no perfect, single metric; true business health is holistic.
• If you had to pick one:
  • Consider trend-based metrics (like profit CAGR) over time-based snapshots.
  • Prioritize cash you could distribute without harming future prospects, as this signals efficiency, operational discipline, and effective cash management.
• Know whether you’re playing a growth or value game as an entrepreneur; investor thinking can be a useful lens for building a resilient company.
• In today’s economic climate, profitability is “cool again,” and chasing unchecked growth is riskier than ever.

Closing Thoughts

Roland and Ryan encourage listeners to reflect on their own businesses:
What is your core “health metric”? Are you tracking something trend-based and meaningful, or simply what’s easy and familiar?
They invite feedback and open the door for future discussion.

Missed this episode? This summary distills all the big ideas, analogies, and actionable insights, so you can immediately evaluate the real health of your business—no lunch reservation required.