Path to Sustainable Growth

I have good news - and bad news.

First the Good News

With about two-thirds of the S&P 500 companies reporting their quarterly earnings,?profits per share are up a significant 16.4% from a year ago, according to market-data-analysis firm FactSet.?

In particular, these big firms, as a group, have had their best end-of-year performance in three?years.?

Wall Street thinks the good times should continue, too. According to FactSet, analysts are?predicting 13% growth in S&P 500 profits in 2025.

Now the Bad News

But for some experts, it’s not the gaudy gain itself, but where the gains are coming from that?could be a worry.?

Most of the profit growth is coming not from selling more products to new or existing customers,?they say, but from either financial engineering—such as buying back stock—or cost cutting.?

According to Korn Ferry's Alina Polonskaia, “Companies are dancing in the same places and?elbowing one another. It’s pretty crowded,” ?

Indeed, revenue growth for the companies that have reported results so far has been 5.2%.?Even with that, more than half of that gain was eaten up by the rising prices companies paid to?produce goods.

To be sure, it’s part of most every CEO’s mandate to keep costs in check. Many firms are currently?in the midst of trimming the number of management layers they have.?

Plus, shareholders want many of the big companies in which they invest to pay them back, whether?those firms buy back shares (which can increase the value of the remaining outstanding shares)?or pay dividends.

Still, firms continue to face some headwinds on the revenue-growth side. The US economy isn’t?expected to grow much more than 2% to 3% in 2025. Consumer sentiment, often a indicator of future?sales, is declining while inflation expectations are rising.?

Worldwide, many other major economies are plodding along.?

Looking Forward - The Path to Sustainable Growth

While hardly a problem on the profit side, revenue growth for firms has been a nagging problem for?some time.?

Mergers, often a strategy CEOs employ to jump-start growth, could be losing their spark. ”Larger?firms are finding that there’s only so much profitable growth they can squeeze out of mergers and?acquisitions,” says Korn Ferry's Dave Rossi.

In general, experts believe that firms have to grow their businesses to be successful over the long haul,?not just rely on cost cutting or share buybacks.?

Expanding more into developing countries or going beyond servicing its most profitable customers?could be helpful. “Executives need to reach out to the overlooked customer bases,” Polonskaia says.?

But the biggest key to future growth, many experts believe, will come from innovation: operational?improvements that make products faster, better, or cheaper, or new devices that save consumers?time and money.

That innovation could also come from investing in talent.?

Of the firms named on the 2024 Korn Ferry’s World’s Most Admired Companies list, eight in 10 said?that growth depends less on investment in technology and more on people—hiring the right ones,?aligning them properly in the right teams, and offering a skills- and career-development program.

It's actually a simple equation:

People develop the Processes that Build the Products that Create the Profits.

Looking for the Path to Sustainable Growth??

Start with Your People - your Biggest Cost and Largest Untapped Potential.

To your success.

What do you think?

Use the comment area below and share your experience or advice on this topic.

Business not growing the way you'd like it to?

As strategists, focused on long-term sustainable growth from a CEO perspective – we help you strategically hone your strategy which drives your Marketing, Sales, Engineering, Operations, Human Resources – every element of your business.

If you're a bit frustrated with slowing or stalled growth – let’s have a short call to see if we can help. Contact me at 480-766-1772 or [email protected] .

Rich Kohler is a Business Growth Expert. His company, Kohler Consulting Group specializes in helping CEOs and Marketing Executives of Mid-Market Aerospace & Defense, Hi-Tech firms who want to accelerate or recapture growth momentum, build a clear roadmap to achieve faster, more predictable and sustainable, profitable growth.

For 30 years, I've used the globally-proven Growth Playbook process to help multiple Private, Private-Equity and Public companies grow profit & sales 10-15%/yr+ including BAE SYSTEMS, Eaton, GE Aviation, Smiths PLC, Transdigm.

Do you need to:

• Address stalled growth, flat-lined revenues, declining profit margins?
• Take a step back to more clearly & confidently navigate complex and rapidly changing markets, intensifying competition?
• Increase clarity and control to reduce the uncertainty and risk around their strategy?

Are you serious about accelerating your growth - and moving to that next level of success?

If so, contact Rich at: [email protected].