An operating business has two options, grow or die. Every company owner must choose grow once they have revenues.

The two ways to grow your company are (1) to reinvest company profits or (2) to make acquisition of cash-producing assets with company profits.

The acquisition strategy is (a) less risky, (b) grows company faster and (c) is thirty times more profitable to business owner over twenty years.

Reinvesting company profits is a slow and risky process

The company owner gambles each year that reinvested annual profit will increase revenues and profits following year. If demand for company's product exceeds supply, owner will use company's profits to increase supplies. If company's production capacity exceeds demand, reinvested profits will be used to increase market for company's product or service.

External variables, like competition, local government policies, global economics and even technology advances can easily undermine best of tactical annual business decisions. My belief and experience tells me that few business owners can sustain annual growth over time, without having a few serious setbacks.

Let's test this out

Here's an example. Let's assume that business owner wins every annual investment gamble over 20 years that owner runs company. The private company owner starts with a company grossing US$1 million each year and successfully gambles annual 20% reinvestment profit. In five years, company should be grossing US$2 million. In twenty years, company should be grossing US$8 million. Again, this means 100% success each year with no nasty surprises or setbacks of any kind.

Bank loans, another possibility

Most business owners soon realize that they can leverage their annual gamble by borrowing money from a local business bank. This increases their risk, but potentially compounds their gross revenues over twenty-year time frame.

Assuming business owner can borrow their annual gross revenues each year at 7% interest, they will net 13%/year on borrowed funds. Their borrowing gamble over 20 years should add about 65% to company's annual gross revenues. So company should be grossing about US$13,200,000, twenty years later.

The problem is that a company borrowing its gross revenues always risks loss of company. Assuming that borrowing company's gross revenues is an even money bet, it's a bad bet. The borrowed funds don't double gross revenues of company in twenty years.

Private equity investment?

Would you accept 1,185,000,000 Tugriks for your company? If you invested in a company, would you accept repayment of your investment and profits in Tugriks? Outside of Mongolia, where Tugrik is national currency, answer would be NO!

Acceptable International Currencies

Today, there are five major world currencies: U.S. Dollar, British Pound, Japanese Yen, Euro and Swiss Franc. Payments in any of these five currencies are acceptable almost everywhere in World.

There is a secondary tier of about twenty semi-acceptable world currencies, like Canadian Dollar. They can be used in international business because they can be converted into five major world currencies without issuing Government's review of currency transaction and Government's potential intervention and termination of payment.

Back to Tugriks

If you have a feed business in Ulan Bator, Tugriks are great. If you expect to die in Mongolia and have your children manage your feed business, Tugriks are terrific. However, if you want to expand your feed business into Russia or PRC, Tugriks become a serious handicap to your plans. If you want to send your children to Cambridge, registrar won't accept Tugriks for their tuition. Should you decide that Mongolian Winters are more than you care to withstand in your old age, you can't use Tugriks to relocate to South Pacific.

Assuming that you have average intelligence and a global vision, you'll do business in a major world currency. It's only way that your company can grow beyond your national borders. It's only way that you, your family and heirs will survive comfortable for next hundred years. There is a saying in States that few people heed. Don't put all your eggs in one basket. History teaches us that eventually political, economic and social upheaval destroy any basket (country).

Taxation Is Not Uniform Around World

In 11th Century, Robinhood fled to Sherwood Forest, objecting to a 20% Government income tax rate. A millennium later, income tax rate in UK is 50% and nobody knows exact location of Sherwood Forest. This isn't progress.