The Investors' Library: Understanding the Business - from the Customer Perspective
"The Investment Checklist" by Michael Shearn is an excellent resource for anyone interested in building a framework.
The book contains 59 questions to ask when researching a business, and I'm going through them one at a time. Shearn wrote the book in 2012, so no doubt some of his questions have changed, but it's still ripe hunting grounds for investors looking to improve their research process.
Last week we covered the first 6 questions on Business Basics. This week we will turn our attention toward understanding the customer with 8 more questions.
Shearn begins the chapter by emphasizing the importance of the customer. 👇
“Customers are the lifeblood of a business. In fact, the quality of a business is determined by the quality of its customers. At the end of the day, they are the stakeholders who determine the fate of the business.” - Michael Shearn
Here are the questions: (Notes and quotes are included below)
Who is the core customer of the business?
Is the customer base concentrated or diversified?
Is it easy or difficult to convince customers to buy the products or services?
What is the customer retention rate for the business?
What are the signs a business is customer oriented?
What pain does the business alleviate for the customer?
To what degree is the customer dependent on the products or services from the business?
If the business disappeared tomorrow, what impact would this have on the customer base?
That's all for this week's edition of The Investors' Library. Next week we will tackle 6 more questions aimed at understanding the strengths and weaknesses of a business and industry.
I'd love to hear from you. Did any of the questions stick out to you? Do you have similar questions already built into your framework? Leave a comment below or find me on Twitter.
Last but not least, I'll release a self-paced edition of the Framework Challenge this weekend. I've taken David Gardner's 25-Question Risk Framework and provided the following:
A spreadsheet to track your scores.
A journal to record your notes.
A step-by-step system to walk you through the framework.
I've put a lot of time and effort into this, and I can't wait to share it with you.
See you this weekend!