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):

  1. Very expensive to build the primary product or core service; difficult to find or rare components

  2. 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

  3. Easy for other companies and teams to replicate the product or service

  4. Marginal cost to produce product or service is very high

  5. Can’t improve over time easily to prevent replication

  6. Difficult to attract and retain customers

  7. Long sales cycle that requires specialized expertise to sell product or service

  8. Kills customers or harms society over time eg tobacco, oil/gas etc

  9. Hard for customers and others to understand benefits

  10. Many other good companies doing it, very competitive

  11. Not enough customers, limited number of people want to buy the product or service

  12. Product or service costs customers money and returns little back eg it is a cost-center vs revenue driver

  13. Team and leadership is dishonest

  14. Core team doesn’t have right skills and/or motivation

  15. No plan or possible growth opportunities

  16. Highly leveraged with debts and limited free cashflow