Spotting Successful Strategies (Part 2): Organic Growth vs. Acquired Growth

Growth. We all know what it means. We have all experienced growth in one way, shape or form. We grow physically and mentally, the children we have grow up, the plants and trees around us grow, the cities we live in grow and so on. However how should a public company grow?

Basically there are two ways in which a public company can grow: organic growth or acquired growth. Which method is the proper avenue for corporate growth? Should a company be using a balance of the two methods? The bottom line is which type of growth shows the public company's investors, clients and general public that they are demonstrating successful strategies and ultimately building shareholder equity and increasing shareholder value.

Organic Growth

Building a public company via organic growth means that the corporate strategy and focus is on internally growing the company through developing new products, services or intellectual property. All in all the company's primary objective is to perform needs analysis, design a product or service, develop that product or service, implement it through marketing channels and evaluate its level of success in the market. A company that is growing organically will find itself dedicating all of its resources into a product. Funding the research and development department, funding the manufacturing division, funding the quality assurance department, funding the marketing and sales teams, etc. At the end of the day, the public company's burn rate is almost entirely comprised of money spent on a product or service.

Acquired Growth

On the other hand, building a public company via acquired growth is the exact opposite. Instead of devoting man power, dollars and time into developing that new miracle product or the latest and greatest, this company will dedicate its resources to acquiring products, services and intellectual property as opposed to building them in-house. The public company will seek technology, products and assets it sees fit to their corporate strategy in order to grow their organization and ultimately build shareholder equity. The clear benefit to growth via acquisitions versus organic growth is time. Money may be saved with this method as well, but harnessing efforts in the right direction for the right reason is priceless. At the end of the day, the public companies need to build shareholder equity. By doing so, it proves to the investors that the public company is positioning itself for success in the market.

There is no secret that we all look at a publicly traded companies success in its stock price. However, the secret is in how a publicly traded company can move the stock price up. It is not within the product that the company invents, develops and markets. Rather it is how the company seeks suitable, profitable and feasible assets to acquire. When these assets are procured, they will increase shareholder equity. Building shareholder equity will demonstrate a public company's successful strategies and as a result increase shareholder value. By increasing shareholder value the stock price will naturally correct itself.

Succeed by seeking and acquiring growth, not by attempting to develop it in-house.