Business Principles

The core fundamentals of entrepreneurship are known as business principles. They are affected by market trends, business sector standards and governmental regulations. These principles are similar to laws in science; in effect, no individual or business can override them for extended periods of time.

Value Investing – Industry Principles and Standards (Lesson 25)

Business Principles Pyramid

Shifting from economic wide factors that impact market price to industry wide standards is essential with understanding and creating decision models for investment with a pool of similar companies. Industry standards are a part of the spectrum of business principles. This spectrum starts with tenets, universal rules that can not be broken by anyone in business. With value investing, the focus is on the primary business tenet of buying low and selling high. It is an undeniable requirement to increase one’s wealth. The spectrum moves towards core business principles that sometimes are not universally applicable. The final set are industry standards. Each industry has its own unique set of principles it must follow to be successful. Some are a function of law, others are driven by consumer expectations or the culture of the industry. For value investors, understanding this dynamic set of standards for each industry drives the holistic thinking of effective investing.

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