The five-to-seven stages of the workflow
Five to seven stages, depending on the shop. The minimum spine is: (1) idea capture, (2) first-look screen, (3) preliminary memo, (4) full diligence, (5) pitch to committee, (6) position-build, (7) post-mortem after exit. A retail investor running their own portfolio can compress (1)-(2) and (5)-(6), but cannot skip the kill-criteria check at (3) without ceding the discipline the workflow exists to enforce.
Where ideas die at each stage
| Stage | Time on idea | Reader | Where ideas die |
|---|---|---|---|
| 1. Idea capture | 10 minutes | Analyst only | Filed in a notebook and forgotten — most ideas stop here |
| 2. First-look screen | 2-4 hours | Analyst only | Numbers don't survive a basic ratio + balance sheet check |
| 3. Preliminary memo (1 page) | 4-8 hours | Analyst + one senior reader | Kill criteria fire; thesis turns out to be already-in-price |
| 4. Full diligence | 1-3 weeks | Analyst + 1-2 senior readers | Primary research contradicts the early framing |
| 5. Pitch to committee | 1 hour live + days of prep | Full investment committee | Committee surfaces a hidden risk or a sizing problem |
| 6. Position-build | Days to weeks | Trading desk + PM | Liquidity or price action shifts the entry math |
| 7. Post-mortem | 1-2 hours after exit | Analyst + committee | Learnings get written down so the next idea benefits |
Kill criteria: the workflow's load-bearing element
Kill criteria are the load-bearing element. At Stage 3 — the one-page preliminary memo — the analyst names three to five specific findings that would END the work on the idea. Examples: "if Q3 segment growth is below 12%, this thesis is wrong"; "if the new product launch is delayed past March, the catalyst window closes." Kill criteria are written BEFORE the diligence work begins, so the analyst cannot retroactively explain away contradicting evidence.
Worked example: Sentry Logistics through the workflow
Worked example — Sentry Logistics (fictional regional trucking, $14 share). The analyst captures the idea Monday after reading an industry note. Tuesday the first-look screen shows debt-to-EBITDA 4.2x — within tolerance — and operating margins expanding 200 bps YoY. Wednesday she writes a 1-page memo: thesis is that fuel-cost normalization plus regional consolidation drives 25% EBITDA growth; kill criteria are (a) Q1 fuel hedge expiration not renewed, (b) any covenant amendment indicating refi pressure, (c) DOT inspection backlog exceeding 30 days. Two of three are checkable from public filings in an afternoon; the third needs a call with a freight broker. By Friday she has signed off on the kill criteria as not yet triggered, and she promotes the idea to full diligence with explicit gates.
The senior reader's response to a weak memo
A healthy kill rate is 60 to 80 percent
Sit with the ideas.
An analyst has a rough idea on Sentry Logistics that they think is interesting. Which of the following is the strongest reason to take the idea through the full pitch workflow rather than just opening a small position immediately?