Golden Rules For Company Investing

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I love launching, building and selling companies. I enjoy the challenges, relish the triumphs and learn from the setbacks.

Today I own a raft of businesses ranging from PR agency Beattie Communications to the Only marketing boutiques. You will find a list of our brands here.

Over the years I’ve also made a shilling or two by investing in businesses where I have no day-to-day involvement.

When deciding whether to put my hand in my pocket, there are ten golden rules that guide my investment decisions:

 

1. Understand The Business

I will only invest if I understand how the company makes money.  For instance, I like media businesses, transport companies and food or drinks retailers because I understand how they generate revenues. I avoid financial businesses if I don’t understand how they create wealth.

 

2. Admire The Management

It’s essential that I admire the management. They must be smart, ambitious, hard-working and dedicated. They must come with a proven track record.

 

3. Invest At A Good Price

You make money in a business when you buy in at a low price and sell at a high price. Paying over the odds, always results in a much poorer return when you sell.

 

4. Invest In A Company That Can Last For Decades

You don’t want to invest in a company that relies on technology that may soon be superseded or operates in a fast-changing environment.

 

5. Track Record Of Success

I always expect the company to have a proven record of success. If it’s a start-up, the founders need to have had an impressive career

 

6. Consistently Makes Good Profits

Past profit consistency is a prerequisite. I’m not keen on investing in turnarounds, no matter how talented the management team.

 

7. Good Growth Prospects And Low Expansion Costs

I always look for growth businesses where expansion requires a low re-investment of capital. For instance, I would much rather invest in a bus company than a cruise line because the cost of buying an extra bus is tiny compared to the cost of purchasing an additional ship.

 

8. A Premium Brand

I like companies with a strong brand reputation that can command a premium for their products or services.

 

9. Little Debt

We all know how ruthless the banks can be when it comes to repayments so I always avoid companies with a mountain of debt.

 

10. High Barriers To Entry

I like businesses where for cost or skill reasons it’s difficult for rivals to start up and gain a toehold.

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