How do you evaluate a business?

Every business in this world boils down to a handful of assumptions.

Take any business, and this is going to be true. Apple’s assumption is that people care enough about good design to pay a premium for it. Google rests on the assumption that organizing information is valuable – Google now seeks to capture as much of that value as possible. The convenience store is based on the assumption that people would pay extra to be able to buy a carton of milk and a can of beans in 5 minutes.

If those assumptions aren’t true, those businesses won’t exist.

When investors evaluate any business idea, they are merely questioning the fundamental assumptions that its founders have. The chance that the business would suceed rests squarely on the correctness of those assumptions.

If you wish to build your business acumen, look around you and figure out the fundamental assumptions behind any business you see.

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