****Seek good growth and avoid bad growth

I love to invest in good quality long-term profitable growth businesses available at reasonable or bargain prices. Yet, growth can be good and can also be bad. Let's take a look.

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.