Exit decision is known before entry decision is made…. Ok... so I always write like a 4-5 line description before I make an investment ……. If I cannot encapsulate in about five sentences, I believe I could not understand the business.
It has to be able to articulate in a short amount of space.you can invert this so let’s say you talk to any business owner, take a guy that runs MacDonald’s franchise in Gurgaon and you talk to him and you ask him you how do run this business?
What are the factors that matters. What are the things you are focused on to run this operation … what he is probably going to tell you is that he does not run it by instructions (?) ………. He would not say there are few things that matters…….. I keep my boys happy I make sure that food quality is maintained….. Place is clean …… and so when you run an investment business ….. You have to look at a business the same way a CEO running a Business would ……. The same variables ……
They are looking forward at three or four variables that are going to control 80% of the outcome. Something comes out from that other field and surprises you … but that’s fine. And that is what we are trying to do, we want to go through 3-4 variables that matters …. Those are going to control the outcome ….
So the key is identifying the right variables and once you know what they are then you would know what the value is …. It’s pretty obvious.
If you look at any market or industry, there will typically be 3 or 4 players which control 80% of the market. If you invert this principle, when you start a business, you'll try to capture at least 60% of the market in a niche field rather than 1 or 2% of a large market.
It's wrong to think that if this is a 10 billion dollar market, and if I take 10%, I'll be a billion dollar company. You need to segment and understand how to attack a market so you have a competitive advantage.
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