Sustainable Growth Planning is comprised of the Four Pillars of organizational resilience strategies that include Competitive Advantage, Enterprise Efficiency, Operations Management (Sales/Marketing/R&D), and Global Enterprise Risk Management (GIRM). All assets, human capital, intellectual property, investments, operations, Information technology, and communications, regulatory compliance, and privacy must be considered when planning sustainability program components. From a finance perspective, Sustainable Growth Rate (SGR) is the maximum rate of growth that a company can sustain without having to finance growth with additional equity or debt. SGR involves maximizing sales and revenue growth without increasing financial leverage. Achieving a great SGR can help a company prevent being over-leveraged and avoid financial distress. Companies with high SGRs are usually effective in maximizing their sales efforts, focusing on high-margin products and services, managing inventory, accounts payable and accounts receivable.
A high growth rate may indicate the company is focusing on investing in R&D and NPV positive projects, which may delay the repayment of debt. A high growth rate company is generally considered riskier, as it likely sees greater earnings volatility from period to period. SGR = (1-d) x ROE, Retention Rate x ROI, or SGR= PRAT. The Retention Rate is [ (Net Income – Dividends) / Net Income) ] which represents the percentage of earnings that the company has not paid out in dividends or retained earning : Net Income – Dividends equal Retained Earnings. Return on Equity (ROE) = (Net Income / Total Shareholder’s Equity). €This represents how much return investors have realized relative to the profit the company has generated.
On the other hand, low (insufficient) sustainable growth rate means that the enterprise is growing too slow and therefore under performing competitors who are growing at a faster rate. When actual growth exceeds sustainable growth for longer periods, management must formulate a financial strategy from among the following options: 1) sell new equity; 2) permanently increase financial leverage (i.e, take on more debt); 3) reduce dividends; 4) increase the profit margin; or 5) decrease the percentage of total assets to sales.
Sustainable growth means that maximum enterprise efficiency initiatives must evaluate a combination of standard financial and managerial accounting metrics that identify, measure, analyze, interpret, and communicate information to stakeholders for the pursuit of organizational goals, risk reduction, and to protect successful operations from disruptions. We employ strategic planning initiatives that result in improved operations, increased financial efficiency, and productivity.
We consult with industry leaders to improve performance through analysis of existing operational and efficiency ratios and developing a customized plan for increasing growth, profitability, and sustainability. Through highly cost effective business services our clients can achieve sustainable growth (SGR) and peak efficiency. Our consulting methodologies employ highly cost effective strategies for the highest Return On Investment, Return on Assets, Risk Management, Capital Management, Human Capital, Sustainable Investing, M&A initiatives, and strategic partnerships.
Our strategies begin with fundamental, and technical analysis taking into account micro and macro economics, industry standards, emerging markets, technology, and strategic imperatives. We analyze market standing, and agree on organizational targets for achieving specific short, medium, and long range goals. After we agree on goals, targets are set, developing specific projects, strategies and techniques to accomplish agreed upon goals. We assist and partners in implementing specific projects to bring the business in line with expectations. We monitor progress through fundamental, technical, and financial analysis tools charting the course to better efficiency and profitability.
With over 30 years of experience in Corporate Finance, Strategic Planning, Mergers & Acquisitions, IT Systems Planning and Integration, Human Capital Planning & Management working leading global enterprises for improved performance, sustainability, and growth, we will help your enterprise plan, implement, and manage a sustainable growth model. If you have issues of concern, we are here to review plans, strategies, sustainability, and finance alternatives.
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