The fifteen points
- Does the company have products or services with sufficient market potential to make possible a sizable increase in sales for at least several years.
- Does the management have a determination to continue to develop products or processes that will still further increase total sales potentials when the growth potentials of currently attractive product lines have largely been exploited
- How effective are the company's research and development efforts in relation to its size?
- Does the company have an above-average sales organization?
- Does the company have a worthwhile profit margin?
- What is the company doing to maintain or improve profit margins?
- Does the company have outstanding labor and personal relations?
- Does the company have outstanding executive relations?
- Does the company have depth to its management?
- How good are the company's cost analysis and accounting controls
- Are there other aspect of the business, somewhat peculiar to the industry involved, which will give the investor important clues as to how outstanding the company may be in relation to its competition.
- Does the company have a short-range or long-range outlook in regard to profits?
- In the foreseeable future will the growth of the company requires sufficient equity financing so that the larger number of share then outstanding will largely cancel the existing stockholders' benefit from this anticipated growth.
- Does the management talk freely to investors about its affairs when things are going well but "clam up" when troubles and disappointments occur
- Does the company have a management of unquestionable integrity?
Appendix
- Functional Factors
- Low cost or high profit margin
- Strong customer orientation to generate a flow of products
- Ability to explain to customer
- Ability to produce a. newer and better products, b. perform services in a more effective or efficient way.
- Effective research. Elements with a. market profit consciousness, b. the ability to pool necessary talent into an effective working team
- Strong financial team: a.direct towards those products with highest potential for profit contribution; b. pinpoint the unreasonable cost; c.capital conservation through tight control of fixed and working capital investment.
- A critical finance function is to provide an early warning system to identify influence that could threaten the profit plan
- People Factors
- Leader with a determined entrepreneurial personality.
- Executive surrounded with a competent team and to delegate considerable authority to them to run the activities of the firm
- Attention must be paid to attracting competent managers at lower levels and to training them for larger responsibilities. Succession should largely be from the available talent pool.
- The entrepreneurial spirit must permeate the organization
- More successful firms usually have some special ways of doing things that are particularly effective for their management team
- Management must recognize and be attuned to the fact that the world in which they are operating is changing at an ever increasing rate.
- There must be a genuine effort to have employees at every level, including the blue collar workers, believe their company is really a good place to work.
- Management must be willing to submit to the disciplines required of sound growth, growth requires sacrifice of current profits to lay the foundation for worthwhile future improvement.
- Business Characteristics
1.Favorable profit to sales ratios may be a better indicator of the safety of an investment
- The best way to mute competition is to operate more efficient
- Efficiency of scale are often counterbalanced by the inefficiency of bureaucratic layers of middle management.
- Getting there first in a new product market is a long step towards becoming first.
- Product are not island, there is indirect competition to make product losing attractiveness
- It is hard to introduce new, superior products in market arenas where established competitors already have a strong position.
- Technology is just one avenue to industry leadership, besides consumer "franchise", service excellence. whatever the case, a strong ability to defend established markets against new competitor is essential for a sound investment
