Growing Versus Scaling a Business: What’s the Difference?
What is a business coach? Is growing and scaling a business one at the same thing?
These are some of the questions business owners ask themselves from time to time. Let’s try to answer the second question:
Growing and scaling are two words used interchangeably to mean the same thing. But if you remember what you learned in your Business 101 class, you know that the two terms don’t have the same meaning. Granted, they have some similarities but they mean two different things. Growing is important in any business but scaling carries more weight. The latter will get you home with less effort while the former will drain a lot of energy off of you and cause frustration and fatigue. So, what does grow and scale mean and what are their differences? Let’s investigate.
Growing a Business
When you say you want to grow your business, you are implying that you want to add resources so that you can increase revenue. So, in essence, your rate of adding resources determines your rate of adding revenue. Often, companies increase their client base by hiring more people to service the client while adding revenue to take care of this cost.
Take for instance a service company doing advertising. In order to increase the number of their customers from 50 to 100, the owners will need more offices and employees. This means the financial growth can only be attained through a few financial losses.
Scaling a Business
Scaling is a term used to mean adding revenue exponentially while adding resources incrementally. Google, eBay, and Salesforce.com are examples of companies that have clearly demonstrated the principle of scaling a business. In a short period of time, the three giants managed to add their customer base with little additional resources to take care of the additional customers. Scaling helps you increase your margin and drive consistent revenue without spending a ton for it. A company that is effectively scaling can add revenue of $10 million for a cost of $5million.
The Problem with Growth
Although many entrepreneurs focus on growth, it is not particularly the right thing for a business. This is because, without the correct preparation, it can quickly become problematic. Let’s use an example: assuming you work sixty hours per week to grow your business. What happens when it does grow? Will you increase your working hours to 80? Our best bet is that you will hire someone to help with the workload. This costs money. In the end, you will feel frustrated and terribly tired.
The point is, if you focus on growth, you will work more and rest little (if at all). If you do decide to hire someone, you might drain all your revenue stores. Eventually, you will only make as much money as you are putting in—perhaps a little more. In summary, growth will certainly consume your time, money, and other resources without really giving you sustainable benefits.
Why Scaling Is More Important
Scaling is quite different. By taking this approach, you get more profit for fewer resources. Mihir Taker wrote an article on Business Business Business claiming that growth is a factor of turnover while scaling is growth based on driving a process. At the scaling stage, a company isn’t really interested in growth for the sake of growing it only but managing the growth as well.
Scalable growth is thus sustainable. It ensures that you keep your sanity while growing business. Taking this approach means you can work normally and enjoy high turnovers for resources.
Scaling strategies for SMEs
Perhaps the question on your mind right about now is how to scale your business. Well, here are a few suggestions:
- Locate The Scalable Models: First and foremost, you may want to locate the areas of your company that can be scaled. Some may not really fit the description so it’s worth looking closely at your enterprise to determine the scalable models.
- Set The Right Standards: Before cutting down on the resources used to scale your company, consider setting the operational standards. Every big company knows the importance of standardization. Determine how you want your company to be run and communicate this with everyone.
- Automate Your Processes: Unless you are not in a position to, find ways you can automate processes in your company. This eliminates chaos and confusion. Think about your company and the areas you can automate.
If a report by Barclays is true, many entrepreneurs don’t have the ambition and solitude to scale when they are starting up. If you want to add to the numbers, your secret lies in scaling, not growing. To scale your business, the trick is to attain exponential growth while utilizing a few resources. If you do your scaling homework right, you should be well on your way to the top.