What Is Growth Potential?

"Growth potential" is a term that is used to describe the prospects that an individual, business, or investment have to generate additional returns over a specified period of time. With each application, assessing this potential involves consideration of all relevant factors, including market capitalization, the resources available to aid in production and management of the effort, and even the anticipated results in terms of revenue. A common assessment in the business community, identifying growth potential is important for everything from identifying the possibilities associated with a proposed expansion project to evaluating the promise associated with a prospective employee.

As it relates to individuals, growth potential is often important when considering what employees have to offer the employer. The process actually begins during the hiring process, when the skill sets and background are considered to determine if an individual is a good fit for an open position and also has some traits that indicate he or she may be of long-term benefit to the employer. Assessment of growth potential continues throughout the term of employment, especially when opportunities for advancement within the organization appear. Simply put, an employee with growth potential is more likely to be considered for promotion, based on past performance and what managers perceive to be the ability of that employee to absorb new information and become proficient with new tasks.

With businesses, growth potential often has to do with the expansion of the business in a manner that helps to increase market share and make the company more prominent among its peers. Here, growth potential may have to do with the prospects of marketing current goods and services to emerging niche markets among consumers, or the development of new products that appeal to consumers who are not currently customers. For example, a cosmetics firm that has mainly focused on a high-end clientele may choose to develop a line of goods that are aimed at consumers with more modest budgets, sometimes marketing them under a different brand name. If there is reason to believe that new line will indeed capture market share among the targeted consumer base, it is said to have true growth potential.

In any incarnation, growth potential has to do with identifying the chances of advancing or growing in some manner. Individuals with good prospects tend to be open to new training and experiences, while companies with this type of potential are usually owned and managed by people who are looking for opportunities to take the businesses into markets where they have not been present in the past. Since there is some risk involved with each of these ventures, taking the time to evaluate the potential in advance, and determine if the use of resources is likely to result in success will make it easier to assess that potential and make an informed decision of whether or not to proceed.