Leveraged Growth: Expanding Sales Without Sacrificing Profits

Abstract

THE TRADITIONAL ROUTES to business growth-organic expansion and acquisition-share a common requirement; investment in proprietary assets. To grow organically, you build new assets. To grow through acquisition, you buy them. Either way, you own them. But the need to own assets-whether they're physical ones like factiories and machinery or intangible ones like information and skills-is precisely what makes traditional growth strategies so risky. You have to make your investment up front, but the payoff doesn't come until later, sometimes much later. The pursuit of growth, therefore, almos always entails a narrowing of margins-for a eime or, in the worst case, forever. But there is another kind of growth strategy, one that involves substantially less risk and offers the potential of an immediate and sustainable boost not only in sales but in profitability. This strategy, which I call leveraged growth, begins with the realization that it is not always necessary.

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