We start by understanding the history of the business we are looking at. That means a lot of background reading; books, annual reports, regulatory reports and anything else useful. We also do fieldwork, visiting companies, their competitors and suppliers. We attend trade shows and mystery shop.
We are trying to understand how a business works, in other words how it makes a profit and what capital and expertise that requires. We want to understand why its customers use it and pay the prices that they do. We also have to find out whether there is any rational way for us to forecast the future based upon our observation of the past and present.
Our work is very detailed and it can take us years to get to a point where we are ready to invest.
For more on how we research, read the Phoenix Primer.