There are a wide variety of reasons that you might want to acquire a business, whether you’re targeting a larger market share, a wider product range, or a boost to your profits. However, there is arguably one constant that buyers look for in a target business and that’s growth potential.

Before spending the money to buy a business and taking on all the associated risks that come with that, you'll want to know that the acquisition makes strategic sense for your business and improves its potential for growth over the coming years.

But how can growth potential be gauged? Here are several metrics to look at when determining whether a target business has the potential for sustainable, profitable, long-term growth.

Demand
The key to assessing the growth potential of a business is to look at its customer base and gain a thorough understanding of its demographics, tastes and economic behaviour. This will provide you with the information required to see which areas of the business have growth potential.

Knowing the high growth potential areas of a business will enable you to devise some growth strategies early. Ultimately, this will help to realise the benefits of the acquisition as quickly as possible, without the need for a lengthy, low-growth integration phase.

Competitors
Another vital step will be to assess a target company’s competitors, allowing you to evaluate the risks rival businesses may pose for growth post-acquisition. This will involve closely analysing the strengths and weaknesses of a company’s competitors, giving an idea of both where the target business can improve to match its rivals as well as niche areas that can be exploited to gain a market advantage.

Complementary areas
A key factor in ensuring that an acquisition contributes to the growth of a business is assessing how the target company’s offering complements your firm’s. While diversifying a business’ offering may be a key motivator behind an acquisition, it will also be vital to gauge the compatibility of the two firms and how the acquisition target will align with your own company’s values and growth strategy.

Does the business model fit?
The above steps should provide a fairly good overview of the business you are looking at buying and the areas and ways in which it may be able to target growth. The next step will be to assess how well the company’s current business model is suited to exploiting those growth areas.

Is the customer base being addressed in the correct way? Is the business operating with the appropriate technology to meet the needs of clients and customers? Is it offering a full enough range of products or services? Taking a thorough look at the acquisition’s business model will be key to seeing potential avenues for growth and how both growth and revenue can be maximised post-acquisition.