Growing and Scaling- what's the difference?
As an entrepreneur you are probably used to these terms. They are both hot topics and desirable business outcomes depending on what phase of business you are in.
However, there is a subtle, but important difference between the two. Most people think of them as phrases for expansion and profitability. If a business is getting bigger and making more profit, that usually means growth and scaling, so the two are often mistaken for each other.
So what’s the difference?
Growing your business means your sales are increasing but your costs are also increasing at the same rate. Yes, your business might be growing but your profit margins will either remain the same or could possibly reduce! Think about businesses going through a growth phase. A Lot of the time, they will need additional resources to achieve the additional sales, for example new team members or outsourced services. These additional costs will affect the profit level received from the newly generated sales.
Scaling, on the other hand, means your sales are increasing, while costs remain the same or grow at a much slower pace than your sales levels. For example, imagine you have found a way to use an existing platform subscription (eg. Karta) in your business to generate a new offering that will only take initial set up costs, but no additional time going forward. This offering could generate sales with no additional costs involved because you are making the most out of an existing expense. Sales are increasing while costs remain stable.
In the same way, you might look at how your team is structured and find that there are ways to gain efficiency in their time, so that they can generate more sales with the same amount of time. Or, you may need to outsource some of their tasks to a lower cost provider, and then use the time you have gained back from income generating activities.
Is your business scalable?
Scalability is a business characteristic. Can your business deliver the same or better results to your customer while using its existing resources? Your business's capacity to maximize profits while using the same resources (time and costs) is the most important difference between scaling and growth.
Stages a business goes through as they scale
The benefits of scaling a business has amazing potential to change your business and your life, if you follow the necessary steps and run your business with intention.
There usually are four main stages in every business life cycle. Each stage brings unique challenges. If you want to read more of my thoughts on this, you can click here.
Start-up - Your focus should be on service and product development, building a sustainable business model and establishing priorities. You should be getting to know your market needs.
Grow up - Your success now depends on your teams’ performance. To grow you need to move past being a solopreneur, one person can’t do everything! Your key priorities as you look to generate new sales. External help starts to come in handy as outsourcing is a flexible way to build your team. Often this is the key to this phase of scaling and reaching the next stage.
Scale-up - You are growing and scaling your business. Your focus is to define and retain your place in the market. This is the point when it’s essential to differentiate your brand from the competitors. You need to learn how to optimize your internal processes, infrastructure, and people. This is when you should prioritize your monthly KPI tracking and develop your SOPs.
Dominating the industry - time to maintain a fresh approach and focus on staying relevant and serving your customers.
This all might sound like too much, or something for a bigger business, so where do you start?
It won’t happen overnight and this is just as much about patience and mindset as it is about planning and taking action. You need to step into the role as leader of your business if you want to scale.
5 Tips to Scale Your Business
Think big, it’s time to take that helicopter view of your business and do some strategic planning. Map out what actions you need to take over the next 12 months to move your business forward.
Boost your online presence and enhance your branding through your website, social media channels and your email list.
Focus on core areas of your business, but don’t lose the seemingly small details out of your sight. Remember it’s in those small details that you can find profit leaks that will hamper your plans.
Build lasting connections with potential partners, clients, customers, or users. You can do this through social media interactions, regularly connecting with people on your mailing list or networking in person!
Find a way to evaluate and extend your finances. You might not like it but it has to be done! To know if the business is growing or scaling, you need to look at your financial information and understand what it means. I recommend having 3-5 key financial measures that you look at and track each month. If this is something you need help developing, reach out to me.
These are my high level tips on how to scale your business. But you need to take ownership of it and be adaptable as things will change over time.
Actionable steps you can take to begin the journey include:
Keeping your customers happy and loyal
Keeping your employees or contractors engaged and satisfied
Staying committed and involved throughout every stage and process (as much as possible)
Avoiding shortcuts
Seeking external help (consulting, outsourcing etc)
Learning when to say “no”
Making data-driven decisions- your monthly financial KPIs- fact over feeling
Growing and scaling can be awkward and uncomfortable while you go through the process, but the rewards are there if you are willing to see it through.
Whatever strategy you choose (using internal resources or using outsourcing and contractors) you should always remember the uniqueness your business brings to the market. Once you understand the difference between scaling and growth, you will see how your resources (staff time and costs) need to be aligned with what your big vision is for the future as you protect your profit levels and scale.
As always, reach out to me here to book a call to chat to see if I can be of any support to you on your business journey!