Not all growth is created equal

TAKING on a growth objective should be based on how much capital is needed, the expected returns, and the time taken to achieve those returns. Business growth is often celebrated. Yet, not all growth is good for shareholders.

Tom Murphy, the former chief executive of Capital Cities, once summed up this approach with a metaphor: “The goal is not to have the longest train, but to arrive at the station first using the least fuel.” Here, the train symbolises a company’s size, while the fuel represents the capital required to grow.

The essence, then, is not about building a business empire, but making prudent decisions about capital investment to achieve optimal returns.