MarketLearn
Chapter 32Advanced~11 min

Questions to ask about any business

Six questions that reveal how a business works.

A business model is simply the answer to one question: how does this company make money, and why do customers keep coming back? Long before you look at a share price, you can learn a great deal by asking a handful of plain questions.

Six questions that open up any business

  1. 1What does it sell?A product, a service, or both? Is it a one-time sale, a subscription, a fee for a service, or space for advertising?
  2. 2Who pays?The person who uses the product is not always the person who pays for it. A website may be free to users and funded by advertisers; a hospital bill may be settled by an insurer.
  3. 3How does it make money?One sale at a time, a monthly subscription, a commission, interest, or advertising? This is the engine that drives everything else.
  4. 4What are its costs?Fixed costs stay roughly the same whether it sells one unit or a lakh (such as rent and salaries). Variable costs rise with every sale (such as raw material, packaging and delivery).
  5. 5What keeps customers?Brand, habit, a long contract, or the inconvenience of switching. Something has to make leaving unattractive, or customers drift away.
  6. 6What could hurt it?A new competitor, a change in rules, the loss of one big customer, a supplier failing, or a shift in what customers want.

Questions to ask about any business

Six questions that apply to every company, from a street stall to a multinational.

What does the company sell?

Describe the product or service in one sentence a ten-year-old would understand. If you cannot, you probably do not understand the business yet.

Applied to a fictional company

ABC Manufacturing sells industrial fasteners — bolts, screws and fittings — to construction firms and vehicle makers.

Try answering these for any company you read about. If a question is hard to answer, that itself is useful information — it tells you where to dig next.
Work through the six questions for a company of your choice in the explorer.

A word you will meet often

The reason customers stay is sometimes called a moat — a lasting advantage that protects a business, such as a trusted brand, a patent, or a large base of users who would lose something by leaving. Not every company has one.

Costs are worth a second look. A company with high fixed costs must sell a lot before it earns anything, so a small drop in sales can turn a profit into a loss. A company with mostly variable costs bends more easily when demand falls.

A business can be easy to understand and still carry real risks, just as a complicated one can turn out fine. Understanding the model is the starting point of analysis, not its conclusion.
If you cannot explain in three plain sentences how a company makes money, treat that as a signal to keep learning before you go further.

Key takeaways

  • A business model describes what a company sells, who pays, how it earns, and what it costs.
  • The user of a product is not always the one who pays for it.
  • Fixed costs do not change with sales; variable costs rise with each sale.
  • Something must make customers stay — a brand, a habit, a contract or a network.
  • Understanding the model is a starting point, not a conclusion.

Check your understanding

Every answer comes with an explanation — the goal is understanding, not a score.

Question 1 / 30%

Which question gets most directly at a company's business model?

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