A successful emerging growth business is likely to display many of the following characteristics:
- Sensibly financed (with prudent mix of equity and debt).
- Strong cash position (with access to follow-on or contingency funds).
- Offers above-average profitability (in terms of return on capital invested).
- Aims for rapid growth in revenues (with profits lagging but in prospect).
- Targets expanding, or otherwise attractive, market segments.
- Develops a strong franchise or brand.
- Devotes substantial resources to innovation (R&D, offerings or market).
- Competes on non-price issues (e.g. quality, service, functionality).
- Very close to customers and responsive to their needs.
- Seeks specialist/leadership image with superior offerings.
- Well managed with high-grade staff & good people-management.
Behind every characteristic there should be an explicit strategy designed to increase the chances of success and not simply aimed at reducing the likelihood of failure. For example:
- A growth business needs a cash war chest and not merely "adequate" debt facilities.
- Likewise, its management team must have the capacity to manage the present business as well as its growth.
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