Define the business precisely
Core question
What does the company actually sell, who pays for it, and where does it sit in the value chain?
Why it matters
A company cannot be analysed clearly until its real economic activities are defined.
Understand the customer
Core question
Why do customers choose this company instead of the available alternatives?
Why it matters
The durability of a business begins with the customer’s reason to buy.
Explain how profits are created
Core question
How does the value delivered to customers become economic profit?
Why it matters
Revenue growth alone says little about business quality.
Analyse the industry and capital cycle
Core question
Who holds bargaining power, and how will capacity change future returns?
Why it matters
Entry, exit, competition, and investment shape long-term returns.
Identify the source of competitive advantage
Core question
What mechanism prevents competitors from taking away excess returns?
Why it matters
High returns are an outcome, not proof of an advantage.
Examine the operating system
Core question
Which operating choices reinforce one another?
Why it matters
A durable strategy usually lives in a connected system.
Assess financial resilience
Core question
Can the company withstand a severe but plausible downturn?
Why it matters
The balance sheet determines whether long-term economics survive short-term stress.
Evaluate capital allocation
Core question
Does business value ultimately increase long-term value per share?
Why it matters
A good operation can still produce poor shareholder outcomes.
Define legal and regulatory exposure
Core question
How could law or litigation change the company’s economics?
Why it matters
Rules can alter licences, pricing freedom, investment, and market structure.
Form a disciplined conclusion
Core question
What does the evidence support, and what would invalidate the thesis?
Why it matters
A useful conclusion separates fact, interpretation, uncertainty, and disconfirming evidence.