How does one assess the health of an individual? Check their vital stats. A child is said to be healthy if he is growing like a normal child should. He will have a healthy weight, a healthy growth in height and an increase in his capabilities, skills and intelligence. A fully grown individual is healthy if all his vital stats are normal. In medical terms – all his body tissues/ cells are being regenrated and there is a constant growth & replacement of all the living tissues which gives him/ her a certain appearance.

Growth is an important factor for corporates too. A company’s financial health is determined in terms of the funds it has and the growth it achieves. For any company, it is important to keep growing in terms of the number of assets that they have, the amount of cash it has, their market share and their sales.

Most corporates have multiple investors/ shareholders who have invested a significant chunk of money in the company and expect great dividends and increase in the price of their shares. For this to happen, a company has to keep increasing their sales at all point of times. Most investors will regularly track the growth rate of sales. The growth rate of sales of any good company, for a year or a quarter, will always be more than the growth rate of the previous year/ quarter. A good company will always have a growth rate that constantly increases.

How does one have a growth rate that increases continuously? Either you sell more products, increase the cost of your products or sell new products to a new market. These 3 are organic ways of growing your company. The growth that occurs with the sales team acquiring new customers and selling more products is defined as organic growth. This is a slow process as the company will first have to innovate & come up with a new product. It will have to build a sales team for it, build the required infrastructure and then sell the products to consumers.

When a company buys another company or a brand and is able to successfully claim that these customers, products and patents are their own – they are said to have grown inorganically. Any company that sells a product/ patent, is in effect handing over its resources and customers to the company that is buying it.The corporate buying the product/ patent has thus grown inorganically – .i.e. by paying money to do so and not buy the usual route.

A lot of us may feel that buying a brand or another company may be tough to manage, expensive and not the right thing to do considering many things that could go wrong. Many investors and senior managers however feel the opposite. Building a brand or a company from scratch can be tough and despite having everything in your favour, things can still go horribly wrong. When you acquire a company, you may inherit a lot of problems, but you also get a hot selling product and a lot of customers. At the end of the day, a CEO has to prove that he deserves the multi crore salary package that he gets and getting incremental sales is the best way to justify it.

BSE Institute Ltd (BIL), a 100% subsidiary of the Bombay Stock Exchange (BSE) offers an Advance Management Program (AMP) that is taught by senior industry professionals currently working at major MNCs. It is designed for Senior Management executives who are about to get promoted to the top 1% of the company.

 

Advertisements