I developed the BADD 40 scale to help people grade a company before they make a potentially dangerous investment decision. The BADD 40 scale is totally unscientific; it was borrowed from an industry friend who uses a similar scale methodology for totally unrelated reasons.

The BADD 40 scale started out as a bit of a gag, but somehow people in the investment community have embraced the BADD acronym. Truth be told, I couldn’t sleep, and I am sitting at the Los Angeles airport awaiting a flight home so I decided to spend a few minutes to write this article.

Grading something as complex as a strategic investment requires some serious thought. Certainly, this type of grading is more deserving than a simple scale from 1-10. BADD 40 involves grading four key areas – otherwise known as the FACK method.

• Financials
• Arrogance
• Competitive Outlook
• Karma

Typically a company that fails the BADD 40 is one that we should all stay away from. The FACK method will help us come up with the overall score.