A framework for distinguishing good from bad growth is a crucial element in generating revenue growth.
Good growth:
- not only increases revenues but improves profits,
- is sustainable over time, and
- does not use unacceptable levels of capital.
- is also primarily organic (internally generated) and
- based on differentiated products and services that fill new or unmet needs, creating value for customers.
The ability to generate internal growth separates leaders who build their businesses on a solid foundation of long-term profitable growth from those who, through acquisitions and financial engineering, increase revenues like crazy but who create that growth on shaky footings that ultimately crumble.
Many acquisitions provide a one-shot improvement, as duplicative costs are removed from the combined companies. But few, if any, demonstrate any significant improvement in the RATE of growth of revenues.
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