Reasearch

Understand the Asset and the Business

When investing in assets it is necessary to understand how that asset is valued. For example, when investing in stocks, it is important to know everything you can about the business. You should know:

• In which industry or industries does the company do business?

• Who is running the company and what are their strategies to maximize the potential of the business?

• What type of business it is: Business to Business (B2B), Business to Consumer (B2C), Business to Government (B2G), a Marketplace, a Platform, etc.?

• How big is the addressable market for the company's products and services (Total Addressible Market or TAM)?

• How does the business get customers and how much does it cost (Customer Aquisition Cost or CAC)?

• What does it cost to run the business (Cost of Goods Sold (COGS), Capital Ependitures (CapEx), Perarting Expenses (OpEx)?

• How profitable is the business or how profitable might it be in the future?

• What Key Performance Indicators (KPIs) and Objectives and Key Results (OKRs) are used to measure how well a business is performing?

• How is the business changing over time? Is it improving, declining, transitioning, etc.?

• Is the business more cyclical or non-cyclical? How consistent are the revenues for the business?

• What is the competitive landscape for the business? Which companies are competitors, collaborators or frenimies?

• How well are the business' products and services positioned relative to the compatition?

• What are the financial indicators that show how solid a business it is and will it continue to perform well over time (debt, cash flow, assets, liabilities, etc.)?

• What are the incentives are there for the people running the company to produce positive results?

• Skin in the Game: How much of the company is owned by the people running it?

• What are the head winds and tailwinds for the business?

• On which vendors, suppliers, platforms and marketplaces does the company rely on to be able to do business?

• Are there commodities that the companies needs to create products?

• Are there skilled workers needed to produce the products or services the company sells?

• How much of the business depends on any customer or group of customers?

• How does the company make use of technology to improve efficiency, reduce cost or create new opportunities?

• How well is the company positioned for advances in technology, changes in the business environment and changes in the preferences of customers?

• How well or poorly run is the business and what changes would improve or adversely affect a company?

• What factors or events would materially change you thesis over time?

• What is the regulatory environment for the company in question? How will changes in law and or government policy affect the business?

• What are the unit economics of the business? For every unit or license sold, how much does it cost to provide, how much profit is possible over time?

• How many repeat or recurring customers are there? How many customers stop buying as compared to how many new customers are attracted?

• How expensive is the stock when compared to other stocks?