“List of companies we will not buy and the issue with each”
Businesses sitting on large or valuable real estate do not work either. Think of a Hotel. The business may be decent, but the value of the land will generally make the price for the cash flow too expensive for us. Issue: Too Expensive
Businesses that require heavy maintenance CAPEX are unattractive to us. Think of an airline. They may have a decent EBITDA number, but most of that money must go back into maintaining the airplanes or buying new ones. Issue: Cash Flow
Companies with heavy client concentration, heavy provider concentration, or even worse, both! These businesses are fragile, they can be easily disrupted or have their revenue stream permanently impaired. Issue: Easy to Kill
Companies with little track record of profit and cash flow. I buy cash flow and I need consistency. While a long track record does not guarantee the future, all else being the same, I will take the track record. Issue: Cash Flow
Heavily seasonal businesses are not a hard no for us, but they are tricky. Management of NWC and reliance on a very short window to make your year, makes these businesses tough. I want easy. Again, these are not a hard no for us, we will look at them, and proceed cautiously. Issue: Cash Flow
Companies that I cannot explain to my wife and kids at the dinner table are easy passes. Maybe they are perfect for someone else, but if I cannot explain the business, I have no reason to own it. Issue: Corcle of Competence