Well, Iâm back from Tamworth.
(What? You didnât know I was there? You really should read more of my articles!)
For those not in the know, I headed up for 4 days with my young bloke for the Tamworth Country Music Festival.
And if you get the chance, please go and see Troy Cassar-Daley, The Bushwackers, John Williamson, and Colin Buchanan in concert. They were all fantastic, and highly recommended.
You know, thereâs something about these sorts of events. The vibe was warm and friendly. Everyone is there to have a good time. There were plenty of coppers about, but I didnât see a single issue.
It was just a great time.
Now, I could bang on (justifiably) about the beauty of our country, and (again) recommend you check it out as soon as you can, if and when you can.
And I do want to say thanks to those people who came up to say gâday, including Greg from Toyota, and Graham (aka Mr. Elvis).
But this isnât about me.
Itâs about some investing thoughts I had while I was away. Theyâre loosely related, but each stands alone.
First, I was reminded of the power of community and of âfansâ. Not just for music, and not just country music. But for artists and businesses in general. If a business can create not just âusersâ or âconsumersâ, but âfansâ, theyâre off to a very good start. And not just a good start, but a very good chance of continued business.
Greg said he loved working at Toyota, because the product was just so good, and that people in the country loved their Toyotas. (I agreed â we have a Prado and a Hilux!)
Most of the fans at the concerts I went to werenât at their first Troy/John/Bushwackers/Colin concert. They knew the music, theyâd seen the artists before, and they were back again.
See, fans arenât just fans. Theyâre usually repeat customers.
Tesla knows all about fandom. So does Apple. And RM Williams. And Toyota.
Thatâs the beauty of fans. Customers buy once. Maybe twice. But with fans, youâve usually got repeat customers. Potentially for years.
Next, the value of what some people call âdiscretionary effortâ.
While I was at the Wallabadah coffee shop (âBest Coffee outside of Italyâ apparently!), a group was discussing some plans they had for their community. I didnât want to eavesdrop, so I didnât hang around, but I could hear them discussing a plan for some sort of event or promotion.
Sure, this group might have been businesspeople whoâd benefit from more exposure, or more people in town, but they were also trying to help the rest of the town. Thatâs âdiscretionary effortâ.
In a business, itâs the extra effort that employees put in over and above the bare minimum required.
No, Iâm not talking about exploitation â Iâm talking about the extra effort that people make, usually when they believe in the mission or purpose of a company.
When they want their business to be successful, because they see the benefit for all parties.
Iâve worked in businesses with and without it, and while itâs not a guarantee, itâs a good indicator of potential business success.
The last thing that struck me while I was away was when my young bloke and I were discussing hotel room prices.
We had to shift hotels because he wanted to stay an extra day, and the one we were in was booked out.
Now, heâs 10, so I saved some of the detailed pricing lessons for another time, but he was interested in how and why different hotels charged different prices.
He gets the general relationship between price and quality, so he gathered that the ânicerâ hotels â in his world, theyâre the ones with swimming pools! â charged more than the others.
And I explained that sometimes, like during the Country Music Festival, all of the hotels were full, but they werenât full all year round.
And that was enough, for him, for now at least.
But it reminded me of the importance of really understanding a businessâ economic model, especially when investing.
What costs are truly fixed? Which are fixed in the short-term, but can be flexed? And which costs are variable?
Having an understanding of those relationships can be really helpful, particularly when youâre thinking about cyclical businesses or those with fickle customer bases.
Which businesses will suffer during recessions? Which will be resilient?
When does a sales downturn become uncomfortable, and when does it threaten a companyâs very viability?
And, for investors, how do you think about the right price to pay for those companies?
Now, thereâs much more to investing than these three observations.
But, if you can put them together, and answer those questions with a degree of evidence-based confidence, I reckon youâre probably a decent way down the road.
A company with fans. Whose employees believe in the mission. And for which you understand the economic drivers and the impact on the bottom line.
If I was looking for a way to create a shortlist of potential investments, I reckon thatâs a pretty good filter.
And seriously, get out into the regions. Youâll be glad you did.
The post What country music taught me about investing appeared first on The Motley Fool Australia.
FREE Investing Guide for Beginners
Despite what some people may say – we believe investing in shares doesn’t have to be overwhelming or complicated…
For over a decade, we’ve been helping everyday Aussies get started on their journey.
And to help even more people cut through some of the confusion “experts’” seem to want to perpetuate – we’ve created a brand-new “how to” guide.
Yes, Claim my FREE copy!
*Returns as of January 5 2023
Motley Fool contributor Scott Phillips has positions in Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.