What attributes would the worst, least desirable businesses have? This way of thinking is surprisingly helpful for figuring out what good businesses should look like.
Here’s what a high risk or bad business might look like (the more of these attributes a business has, the more difficult it will be to succeed):
Very expensive to build the primary product or core service; difficult to find or rare components
Takes a long time to build the product or service before it can address a real customer need and unknown if it will ever fulfill the needs
Easy for other companies and teams to replicate the product or service
Marginal cost to produce product or service is very high
Can’t improve over time easily to prevent replication
Difficult to attract and retain customers
Long sales cycle that requires specialized expertise to sell product or service
Kills customers or harms society over time eg tobacco, environmental impact, etc
Hard for customers and others to understand benefits
Many other good companies doing it, very competitive
Not enough customers, limited number of people want to buy the product or service
Product or service costs customers money and returns little back eg it is a cost-center vs revenue driver
Team and leadership is dishonest
Core team doesn’t have right skills and/or motivation
No plan or possible growth opportunities
Highly leveraged with debts and limited free cashflow