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Growth targets
BY MATTHEW D. MOHR
Determining reasonable growth targets for any business is an important task. In today’s market, business growth is a key indicator of success. What growth (or decline) to anticipate and demand from employees is critical for proper planning. Wall Street financiers are rewarding sales growth, even if unprofitable or unsustainable, with high stock prices (valuations).
Evaluating some of the current high-growth enterprises will shock a disciplined financial manager. A few companies traded in the public markets have high valuations (especially e-commerce) which are not supported by fundamental value, cash flow or profits.
Our region has had phenomenal growth over the last decade and, as a result, business owners are addressing how to grow and/or how to profitably keep up with increased demand. During one recent business review a business manager was discussing his plan to add volume this year. He said the market looks to support 14 percent increases again, but due to people constraints — the ability to find quality employees — and the high cost associated with new business development, he decided on a 7 percent growth plan. This is actually a good strategy; he is going to work for sustainable, long-term relationship-based growth which will be profitable over time.
Years ago Linden Boyd, a regional business consultant, addressed this positively as “five yards and a cloud of dust” verses a Hail Mary or an attempted 50-yard touchdown pass.
A wealth-building stock portfolio is much more likely to be built by continually buying established “Blue Chip” stocks over time rather than putting everything you have into the newest hot Russian hedge fund and hoping to get rich!
Continually grinding out reasonable growth may not be as exciting as making the big play, but continual strategic profitable growth based on long-term sustainable business strategy leads to success. PB
Matthew D. Mohr CEO, Dacotah Paper Co. mmohr@dacotahpaper.com
