IBIS High Growth Plan

High growth companies (defined as those doubling in profitability in three years, or growing at 24% compound each year) pose specific problems for the investor and/or planner. Such companies are under stress to achieve their targets - often set at or beyond the limits of what is achievable.

A review of 57 companies in this category provided by three German banks has attempted to create a scoring system which identifies the level of stress - market, product, personnel, financial - which the company is facing, based on the achievement of profitability targets (IRR, total net profit) over a three year period. The higher the level of stress, the less likely the company is to achieve the growth targets set out in the three year plan. The review criteria contain some of the elements of the other analytical frameworks - but emphasises changes in performance in many areas rather than a steady state. The review is designed for existing companies which are entering a high growth phase - it is not designed for start up operations.

In common with the other review frameworks, an overall score will be provided initially. As the database grows, further information will be available. Review information remains confidential in common with the other frameworks, merely requiring a name and e-mail address.

All answers are either Yes or No. Where the information is not provided, the answer assumed is No.

NAME:

E-MAIL ADDRESS:

Yes	No	1. Does company growth rate exceed market growth rate by more than 30 per cent over the three year period?
Yes	No	2. Do the top five competitors account for more than 40 per cent of the market?
Yes	No	3. Do the top five customers of the company account for more than 60 per cent of sales?
Yes	No	4. Has the company lost more than 30 per cent of customers gained three years ago?
Yes	No	5. Do average sales by customer increase by more than 30 per cent during the period of the plan?
Yes	No	6. Do the top five customers account for more than 40 per cent of the market?
Yes	No	7. Is marketing expenditure above the industry average for the three year period?
Yes	No	8. Is sales expenditure above the industry average for the three year period?
Yes	No	9. Will 80 per cent of the sales be achieved outside wholesalers, agents, distributors at the end of the plan?
Yes	No	10. Is there an organised and structured quality control system in place?
Yes	No	11. Are gross profit margins above the industry average at the start of the plan?
Yes	No	12. Is the company spending above the industry average on R&D throughout the plan period?
Yes	No	13. Have 40 per cent of sales been achieved from products/ services introduced in the last three years at the start of the plan?
Yes	No	14. Is more than 50% of supply guaranteed with long term contracts?
Information Systems
Yes	No	15. Is there a comprehensive and effective financial/ non financial information system in place?
Personnel
Yes	No	16. Is the average skills level above 3 at the start of the plan?
Yes	No	17. Is labour turnover below 10 per cent at the start of the plan?
Yes	No	18. Does training account for 3% of sales turnover?
Yes	No	19. Have the senior management on average more than 3 years experience each of the industry?
Yes	No	20. Does the administration expense ratio remain stable or fall during the plan?
Yes	No	21. Does the best paid employee earn more than 8 times the average skilled wage?
Yes	No	22. Are bonus systems spread throughout the company?
Financials
Yes	No	23. Does ROCE increase less than 30 per cent during the plan period?
Yes	No	24. Does turnover per employee increase less than 50% during the plan period?
Yes	No	25. Does current ratio stay above 1.6 during the period of the plan?
Yes	No	26. Do dividends increase by more than 30 per cent during the period of the plan?

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19 March 2007 15:27

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