Rich and Co.

M+A Advice: Growth Potential Is Your Most Valued Business Asset

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Take Aways

Our view is simple – growth produces the return.  What makes scale valuable – growth.  What makes EBIDTA valuable – growth.  What makes your firm valuable — growth potential.  NOT the growth in the past, unless it’s a predictor or growth in the future.

Without growth, there is a negative return (generally.)   Expenses rise naturally so erode the status quo.  Sometimes dramatically, usually not.  

Efficiencies are part of optimizing growth but need growth to realize the real return.

Research says most growth is extrinsic to the business – so being in a growth market is critical.   Financial services is a natural, and one of the best, growth markets since it is reliably driven by demographics.  Same for healthcare, etc.

Tangible growth assets are the same for most businesses:

  • Proprietary distribution, partnerships and “points of sale.”  Most financial services businesses “own” long term referral relationships with  other professionals, inside of industries etc.
  • Growth capturing business processes – Capturing growth is a mechanical process of data-base mining at it’s core.  It is not clever or creative but a pretty standard process of continuously moving people through a sales funnel.  Marketing gets them in the funnel, sales moves them out as clients or losses.  Generally, financial services firms are excellent at closing prospects and horrible at creating them.  Only in financial services is it a badge of honor to “We do no marketing!”
  • Intellectual Property – Growth tends to be enhanced by proprietary ideas, products/solutions/services, problem-solving resources and tools.  Some firm’s IP are better in synch with market demands than others.
  • Technology – The CRM systems, etc need to be up to date.  Not state of the art but current.
  • Business Development People — People buy professional services from people not machines, yet.
  • New Product Processes — Markets demand new solutions to new problems or old problems.  Do you beg-borrow-steal or create the new products/solutions your market is demanding.  Many simply ignore the demands.
  • Growth Strategy – Is anyone thinking about the who, what, where, how and when of capturing growth?  Probably not.  Let’s be honest.

We’ll stop here but growth potential can be operationalized, executed and measured.  Growth always is measurable.  If it can be measured it is an asset!



Written by Rich and Co.

September 18, 2012 at 7:02 pm

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