Ensure Growth - Carefully

Ensure GrowthCarefully

Setting a goal of an annual growth rate, specific to each company, enables you to measure your progress. We must grow at an acceptable rate (approximately 15% per year) and must do it economically. To achieve this, there are many things to consider. Most importantly, we try to grow in a manageable manner. Generally , rapid growth periods are associated with a major acquisition. We will usually allow the region making the acquisition to take time to digest it and grow its personnel before we burden it with another major event. It is critical in business to pay attention to the details and growing too quickly is a formula for inevitable disaster.

In terms of which risks and opportunities to pursue , we opt for low to moderate risk investments with upside potential. Here, sufficient technical data to make a good decision is crucial. In this area as well as in others, technology has a major impact on our business. It helps us manage production through real time information and allows us to administer the complex ownership web that is characteristic of the business.

At the same time, the bigger potential plays tend to be in new areas with more risk. Although we will periodically invest in these, we limit our exposure to this type of idea to no more than 10% of our Capex budget. Many would categorize our company as an acquisition/exploitation company. This is because we make niche acquisitions where we add value. These are generally small to moderate size acquisitions of producing and non-producing properties.

The first question we ask ourselves when an opportunity presents itself is, Why is it worth more to us than to the seller or competitors ? If there is no valid answer to that question, then we will probably not offer a competitive price. We usually add value through new ideas for new prospects that others have not identified. We may also add value through operational synergies. Adding value should be the watchword for niche acquisitions in any business. Other things to keep in mind are the appropriate application of new technologies and the control of costs.

Our incentive programs are geared to a Win/Win approach. If our company does well, the incentive compensation is lucrative to the individual and if we do not make money, there is no incentive compensation. It is important that the incentive plans identify the proper drivers and success indicators so that only the proper performance criteria are targeted . It is also important for the system to be simple enough for employees to understand it.