Investor’s Library: Fundamental Analysis, Technical Analysis, and Income Investing (Collection)

8. Analysis Tool #5: Business Plan Analysis

If you were considering buying a local business, such as a bicycle shop, would you base your purchase decision entirely on how much money the seller said he or she made last year or on the seller’s profit forecast for this year?

I bet not. Instead, you’d probably want to know where the shop gets its bicycles, how much it pays for them, and whether the competition is paying the same prices.

You would check for alternative sources in case an important supplier goes out of business or decides to open its own outlet and stop selling to you. You’d also want to know something about your customers. Are they mostly individual consumers, or did one or two bicycle courier services account for a big hunk of last ...