The Smart Investor
    Facebook Instagram
    Thursday, March 23
    Facebook Instagram LinkedIn
    The Smart Investor
    • Home
    • About
      • About Us
      • Careers
    • Smart Investing
      • Getting Started
      • Investing Strategy
      • Smart Analysis
      • Smart Reads
    • Special Free Reports!
    • As Featured on BT
    • Our Services
      • Our Services
      • Subscribe now!
    • Login
    • Cart
    The Smart Investor
    Home»Smart Investing»14 Things to Check Before You Buy a Stock: Part 3
    Smart Investing

    14 Things to Check Before You Buy a Stock: Part 3

    Looking at a business from the customer’s perspective can help understand it better.
    Royston YangBy Royston YangOctober 6, 20224 Mins Read
    Facebook Twitter LinkedIn Email WhatsApp
    Making a List on Notebook
    Share
    Facebook Twitter LinkedIn Email WhatsApp

    We are now at part 3 of a long list of items to check on before you decide to buy a stock.

    This time, we look at the customer perspective to better understand the business. 

    You can take a look at the previous parts 1 and 2 here and here. 

    So, let’s jump straight into the remaining questions.

    11. What are the signs a business is customer oriented?

    A business that is set up to take care of customers’ needs and provide great customer service will enjoy repeat business. 

    Look out for companies that emphasise customers’ welfare as well as those with a clear customer orientation. 

    Remember that customers are key to the survival of any business as they are the ones who bring in revenue and cash.

    If the investor can find clear signs to show that the business is adored by customers, it most likely will have a powerful moat compared to its competitors.

    12. What pain does the business alleviate for the customer?

    Businesses should be set up to solve problems for customers or make their lives easier. 

    Many successful businesses sprung up from ideas that entrepreneurs had when they encountered difficulties or obstacles. 

    These challenges prompted them to think about how to solve the problem or correct the situation. 

    The more pain points the business alleviates for the customer, the more business it will naturally attract. 

    Along the same lines, a convenient customer experience will surely endear the customer to the business, helping it to generate strong customer loyalty.

    13. To what degree is the customer dependent on the products or services from the business?

    Investors need to ask themselves how reliant customers are on the business for its products and services.

    If customers cannot find alternative suppliers, then the business can charge higher prices and still maintain constant (or even rising) sales volume. 

    Another factor to look at is whether competitors are offering the same type of product or service and the switching costs for the customer. 

    In a nutshell, if the customer is very dependent on a company’s products, this will make the customer “sticky” and it is harder to lose such customers even when bad times roll along.

    High switching costs will deter the customer from changing suppliers, even if the supplier may offer more attractive terms and better service.

    14. If the business disappeared tomorrow, what impact would this have on the customer base?

    This may seem a rather drastic question, but it is a good thought exercise to assess how customers will be impacted by the overnight disappearance of the business. 

    Take a commodity firm for example – if it disappeared overnight, the customers would simply switch to another commodity supplier without a pause. 

    It would be business as usual without much disruption. 

    However, if the business was an important cog in the supply chain (for example, the manufacturer of work-in-progress components that are sold off for final assembly), then customers would scramble to look for another supplier with the same production capacity, capability and know-how. 

    These points also illustrate the importance of the company to its customers.

    The next part will look at questions that help evaluate the strengths and weaknesses of the business and the industry.

    First-time investors: We’ve finally released our beginner’s guide to investing. Read it in an afternoon, follow the principles, pick an investing style and buy your first SGX stocks within the next few hours! Click here to download it for free.

    Follow us on Facebook and Telegram for the latest investing news and analyses!

    Disclaimer: Royston Yang does not own any of the companies mentioned.

    Yahoo
    Share. Facebook Twitter LinkedIn Email WhatsApp

    Related Posts

    Aircraft Engine on Runway

    Can ST Engineering’s Dividend Increase After Clinching a S$430-Million Contract?

    March 22, 2023
    Forklift in Warehouse

    5 Singapore REITs That May Comfortably Weather Higher Interest Rates in 2023

    March 22, 2023
    Person Putting on Rubber Gloves

    Top Glove Surged 21.4% in the Past Week: Are the Glovemaker’s Troubles Over?

    March 21, 2023
    Facebook Instagram LinkedIn Telegram
    • Careers
    • Disclaimer & Privacy Policy
    • Subscription Terms of Service
    © 2023 The Smart Investor. All Rights Reserved. The Smart Investor, thesmartinvestor.com.sg, an investment education website managed by The Investing Hustle Pte Ltd (Company Reg No. 201933459Z) is not licensed or otherwise regulated by the Monetary Authority of Singapore, and in particular, is not licensed or regulated to carry on business in providing any financial advisory service. Accordingly, any information provided on this site is meant purely for informational and investor educational purposes and should not be relied upon as financial advice. No information is presented with the intention to induce any reader to buy, sell, or hold a particular investment product or class of investment products. Rather, the information is presented for the purpose and intentions of educating readers on matters relating to financial literacy and investor education. Accordingly, any statement of opinion on this site is wholly generic and not tailored to take into account the personal needs and unique circumstances of any reader. The Smart Investor does not recommend any particular course of action in relation to any investment product or class of investment products. Readers are encouraged to exercise their own judgment and have regard to their own personal needs and circumstances before making any investment decision, and not rely on any statement of opinion that may be found on this site.

    Type above and press Enter to search. Press Esc to cancel.