A Technique to Screen Business Investment Opportunities

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Lots of very bright people get burned by the assumption that every business owner who has learned how to make decisions about his/her own company can objectively evaluate the potential of someone else’s business.

If you are regular reader of this blog or one of the 200,000+ business executives who view weekly broadcasts of The Growth Strategist® peer to peer talk show, you are familiar with our tagline ACHIEVING ACCELERATED GROWTH WITH SUSTAINED PROFITABILITY® and you may also already know that the secret to success lies in reversing the phrase.  Know what drives your profitability, do what is needed to sustain it, then growth strategies (like acquisitions, new products, or geographic expansion through franchising are relevant)…then you can step on the gas to accelerate.

OK. So what if you used that tagline as a technique to screen potential investments in other peoples’ companies? It takes some practice, but it does help.

Can you tell what REALLY drives the profitability of a business?  The answer is fairly evident for some companies.  Innovation comes to mind for APPLE®.  But it’s not so clear with other companies.  What has driven the profitability of H&R Block® all of these years?  Being able to train people quickly? Flexible staffing?  An understanding of taxes?  Simplification?  See, the answer is not always so obvious. That is the first question when you consider investing outside your core business.

In my recent interview with Eric Shepocaro, the CEO of TelX, it became clear that their focus on how large clients can benefit from leveraging TelX’s technical advances has driven their profitability.  It is not just about creating new technologies, building new data centers, or going to the cloud for the sake of going to the cloud.

Once you have your arms around what drives profitability, analyzing what is involved with sustaining that factor is critical.  What could interfere with APPLE®’s innovation? What could slow down H&R Block’s ability to simplify and replicate? What could distract TelX from its focus on customers’ leveraging their technology?  The profitability of businesses that are based on helping companies comply with laws, regulations, rules, and quotas can be compromised by the slippage in ethics during recessions.  Profitability won’t be sustained if the government or justice system can’t follow through on enforcement.  You would clearly need to dig deeper before investing in a business built around compliance.

If you become convinced that the answers to the first two screening questions (criteria) are sound, then you can decide if the proposed growth strategies serve those answers well enough (are congruent). 

 

Aldonna R. Ambler, CMC, CSP has earned the right to be called THE GROWTH STRATEGIST®. She has won over 2 dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across 4 recessions.  Her midsized BtoB clients get on…and then stay on…the published lists of the fastest growing privately held companies. She owns and operates a suite of companies that help privately held midsized companies achieving accelerated growth with sustained profitability® through opportunity & resource analysis, 4 approaches to strategic planning, executive advisory services, growth financing, and targeted search.  2012 is Ambler’s 8th year hosting a weekly peer-to-peer-to-peer syndicated on line talk show that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. An archive of over 300 interviews is available at www.GrowthStrategistShow.com. She can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com.

About Aldonna Ambler:
Known as The Growth Strategist®, Aldonna Ambler built and grew a suite of companies to help midsized B2B companies achieve accelerated growth with sustained profitability® A Certified Speaking Professional (CSP), Ambler has addressed over 2000 audiences and hosted a syndicated online talk show about growth strategies for 9 years. As a growth financing intermediary, Ambler raised over $1 Bil dollars for midsized companies. The winner of over 2 dozen prestigious national and statewide "entrepreneur of the year" awards, Ambler is available to speak about “profitable growth during any economy” and/or serve on the board of a growth-oriented privately-held company.

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