Why Sustaining Growth Is Harder Than You Think

Two Minutes Reading for business analysis

• From 1965 to 2008, the top 500 nonfinancial companies in the U.S. grew revenues at a median rate of just 5.4% per year.
• About one-third of large companies managed to grow more than 10% per year over a decade. That sounds good until you flip it around: two-thirds didn’t.
• Even big winners that grew quickly for a few years often slowed down. Nearly half of companies that grew above 15% in the late 1990s saw growth drop below 5% within ten years.

1. Mature markets   Once industries mature, it’s harder to keep grabbing market share. Think of how Coca-Cola sells drinks everywhere, but can’t expand as fast as it once did.
2. Economic cycles   Growth follows the health of the economy. Companies can’t avoid downturns.
3. Competition   Every new product or market opportunity attracts rivals, cutting into growth.

• Be skeptical of big promises. When a CEO says their $10 billion company will grow 10% per year for the next decade, that means adding $11.6 billion in new revenue annually by year ten far harder than it sounds.
• Don’t expect miracles. Even good companies will have years of slow growth or even shrinking revenues.
• Focus on discipline, not hype. The companies that win over decades are those that nurture new opportunities patiently and avoid chasing unrealistic targets.