What constitutes a good business?
Let’s turn to Seth Klarman for some advice.
In other words, a good business is one that enjoys the following characteristics:
- Strong barriers to entry
- Limited capital requirements
- Reliable customers
- Low risk of technological obsolescence
- Abundant growth possibilities
- Significant and growing free cash flow
Keep these six characteristics in mind as a mini-checklist when thinking about and analyzing a certain business, trying to decide if the business in question meets these requirements for what constitutes a good business.