Seth Klarman Defines What Constitutes a Good Business

What constitutes a good business?

Let’s turn to Seth Klarman for some advice.

GB3

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.

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