Checklist

Firm Evaluation Checklist.

Uses:

Investment,
Acquisition,
or Strategic Partnering.

Business Quality & Competitive Edge

✅ Does the company have products/services with strong market potential? (e.g., long-term sales growth)
✅ Does management have a strong commitment to R&D and innovation?
✅ Does the company have a sustainable competitive advantage? (e.g., brand, patents, cost leadership)

Management Quality

✅ Is management honest, competent, and shareholder-friendly?
✅ Does management have a proven track record of execution?
✅ Are executives transparent and focused on long-term growth?
✅ Track record of capital allocation (ROIC vs. WACC) ✅ Insider transactions (are they buying or dumping stock?) ✅ Compensation structure (skin in the game or golden parachutes?)

💰 Financial Strength & Profitability

✅ Does the company have strong profit margins? (Fisher looked for above-average margins)
✅ Is the company efficiently managing costs and operations?
✅ Does it have a disciplined approach to financing? (Low debt, smart reinvestment)
✅ 3–5 years of audited financial statements (income, balance sheet, cash flow) ✅ Revenue trends and breakdown (by product, region, segment) ✅ Profit margins (gross, operating, net) ✅ EBITDA and free cash flow ✅ Debt-to-equity ratio and liquidity ratios ✅ Accounts receivable/payable aging ✅ Financial forecasting accuracy ✅ Capital structure and funding history ✅ Free cash flow conversion ✅ Working capital efficiency ✅ Debt maturity profile ✅ Covenant headroom ✅ Capex vs. depreciation (are they starving the business?)

Industry & Competitive Positioning

✅ Is the company a leader in its industry? (Fisher preferred #1 or #2 players)
✅ Does it have a durable moat against competitors?
✅ Are there strong sales and distribution networks? ✅ Market size and growth trends ✅ Competitive landscape (SWOT analysis) ✅ Differentiators and unique value proposition ✅ Market share estimates ✅ Customer segmentation and acquisition channels ✅ Pricing power and brand equity ✅ Strategic partnerships and alliances ✅ Barriers to entry (regulatory, IP, tech, capital) [] Porter’s Five Forces

Future Growth Potential

✅ Does the company have a clear path to future growth? (New markets, product lines, etc.)
✅ Is the company adaptable to industry changes?
✅ Are there signs of operational excellence (e.g., high employee morale, low turnover)?
[] TAM/SAM/SOM quantification [] Pipeline visibility (backlog analysis) [] R&D ROI (are they spending wisely or throwing money at hype?)

🧑‍🏭 Business Model & Operations

✅ Products/services overview and pricing ✅ Revenue model (e.g., subscription, B2B, direct sales) ✅ Core processes and workflows ✅ Key suppliers and supply chain risks ✅ Production capacity and scalability ✅ Technology stack or production methods ✅ Inventory turnover and cost efficiency ✅ Process automation and maturity

👥 Customers & Sales

✅ Top 10 clients and concentration risk ✅ Customer satisfaction and retention metrics (NPS, churn) ✅ Sales channels and performance ✅ Contract terms, revenue predictability ✅ Pipeline and lead conversion rates ✅ Marketing efficiency (CAC, LTV) ✅ CRM usage and data maturity

👨‍👩‍👧‍👦 Human Resources

✅ Total number of employees and FTEs ✅ Key talent and attrition rates ✅ Compensation structure and incentives ✅ Training and development programs ✅ Labor relations and union status ✅ Diversity, equity, and inclusion practices ✅ Hiring pipeline and talent availability

⚖️ Legal & Compliance

✅ Pending or past litigation ✅ IP ownership, patents, and trademarks ✅ Regulatory compliance (industry-specific + general) ✅ Contracts with vendors, clients, or partners ✅ Licensing and certifications ✅ Data privacy and cybersecurity compliance (e.g., GDPR)

🧠 Technology & Innovation

✅ Core IP and technological differentiators ✅ R&D intensity and product pipeline ✅ System architecture and scalability ✅ Digital transformation status ✅ Security and disaster recovery ✅ IT staffing and third-party dependencies

Macroeconomic Sensitivities

[] FX exposure by currency [] Input price sensitivity (commodities) []

Geopolitical Factors

🚩 Risks & Red Flags

✅ Revenue dependency on few clients ✅ Key-man risk (CEO/founder dependence) ✅ External threats (regulation, market shifts) ✅ Supply chain fragility ✅ Outdated tech or infrastructure ✅ Unrealistic projections ✅ Employee dissatisfaction