Companies are failing to grow organically. CEOs talk a big customer game and then go back to their offices, acquire their competitors and lower prices.
Shockingly, boards of directors encourage this.
Acquisitions is the current growth strategy of Forbes Global 2000 companies. As a result, the number of publicly listed companies traded on U.S. exchanges has been cut in half in the past 20 years -- from about 7,300 to 3,700.
According to the World Bank, the number of listed companies on all global exchanges -- currently 44,000 -- has flatlined since 2006, with a recent two-year decline.
The herd is getting pretty small. At some point, this acquisition strategy hits a wall. It makes you wonder how long we'll need the New York Stock Exchange and Nasdaq.
In a perfect, growing world, the market would have doubled the number of big public companies instead of halving it.
While we are not advising our clients to stop acquiring, we are advising them to immediately execute an organic customer growth strategy, especially in foreign markets.
Â鶹´«Ã½AV analytics find most companies can double their revenue by simply selling more to their existing customer base. There are tens of millions of dollars of lost growth opportunities in single customers, let alone hundreds of millions of dollars throughout your customer base.
Note to boards of directors: Rather than pay unrecoverably high prices for acquisitions, Â鶹´«Ã½AV recommends that all our clients immediately implement a hardworking, authentic organic growth strategy -- one that requires a comparatively tiny investment.
