Let us practise. Meet GreenLeaf Foods Ltd — a made-up company that sells packaged snacks through shops and online. It is fictional, but a real business of this kind would have to answer exactly these questions.
| Question | GreenLeaf Foods |
|---|---|
| What does it sell? | Packaged snacks sold through shops and online |
| Who pays? | Shoppers at the counter, and shopkeepers who buy in bulk at a discount |
| How does it make money? | A small profit on each packet, repeated across millions of packets |
| What are its costs? | Raw materials and packaging (variable); factories and salaries (fixed); distribution and advertising |
| What keeps customers? | Brand recognition, a familiar taste, and wide availability in nearby shops |
| What could hurt it? | A price war, rising sugar and packaging costs, a health trend away from snacks, or loss of shelf space |
The six questions applied to one fictional company.
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.
What could hurt this business?
- Input costs: sugar, oil and packaging prices can rise faster than the company can raise its own selling prices.
- Competition: a rival can cut prices or win the best shelf space in the most-visited shops.
- Changing tastes: customers may slowly move towards healthier snacks.
- Distribution: if a large shop chain stops stocking the product, sales fall quickly.
GreenLeaf Foods is invented for practice. Real businesses are messier, and their models often change over time.
The habit of asking these six questions works on any company, in any industry, whether it is listed on an exchange or not.