Growth is often seen as the best measure of corporate success.

Growth is often seen as the best measure of corporate success.

A company growing at a rate of 15% per year is doubling in size every five years.

Rapid-growth companies can be defined as those with annual growth rates of 20% or more.

Super-growth companies show a compound growth rate of around 40% per year.

MARKET SHARE INFORMATION

Market share information can provide valuable support to the analysis and interpretation of changes in a company’s turnover.

The majority of companies provide turnover growth details in their annual report, but few offer any details of market share.

When turnover is known for several firms competing in the same market, it is possible to devise a simple alternative to market share information.

Company	A	A	B	B	C	C	D	D	TOTAL	TOTAL
Year	1	2	1	2	1	2	1	2	1	2
Sales ($bn)	2.5	2.9	16	16.3	5.9	5.5	17.2	18.8	41.6	43.5
Share (%)	6	7	39	37	14	13	41	43	100	100

How their share of the joint total market changes can readily be followed.  If this is done for a number of years, the analysis can form the basis for a performance comparison.

RAPID GROWTH COMPANY IS NOT ALWAYS A SAFE AND SOUND INVESTMENT.  RAPID GROWTH CANNOT ALWAYS BE SUSTAINED. 

A common view is that a rapid-growth company is safe and sound investment.

However evidence suggests that rapid growth cannot always be sustained.  There are of course exceptions.  

BE CAUTIOUS OF GROWTH THROUGH DIVERSIFICATION OR ACQUISITION, THROUGH INCREASING DEBT FINANCING AND THROUGH TURNOVER GROWTH WITHOUT PROFIT.

·         However, it is probably safer to assume that rapid growth, particularly if associated with diversification, often through acquisitions, will not continue.

·         If high compound growth rates are matched by increasing debt financing, extreme caution is called for.

·         For some companies, turnover growth is seen as the prime objective and measure of success, even when it is being achieved at the cost of profitability.  In the late 1990s, e-business provided many extreme examples of this.

ONE-PERSON COMPANY

• GROWTH THROUGH DIVERSIFICATION, COMMONLY THROUGH ACQUISITION.

Being pushed towards diversification to fuel continued growth is often the final challenge for the one-person company.  Having proved itself in one business sector it moves into new areas, commonly through acquisition.  More often than not its old skills prove not to be appropriate in the new business, attention is distracted from the core business, and it is viewed as having lost the golden touch.  Its survival may depend on new management and financial restructuring.

• WHEN A ONE-PERSON COMPANY’S GROWTH SLOWS AND CRITICISM MOUNTS

When a one-person company’s growth slows and criticism mounts, two scenarios may occur. 

• ·         In one, the individual running the company begins to take increasingly risky decisions in the hope to returning to previous levels of profit growth. 
• ·         In the other, recognising that there is little that can be done immediately to improve operating performance, the individual steps outside the law and accepted business practice to sustain his or her personal image and lifestyle.  Often in these companies other executives are reluctant to rock the boat and go along with the deception.