Growth vs scaling: What s the difference and why does it matter?

Patrick Whatman

Keys to scaling a business

The concept of scaling a business is often used interchangeably with growing a business, but these are two distinct concepts. Take successful startups or new small businesses: Without a clear definition of scaling a business, we mistakenly think of these companies as successful because they achieved massive growth in a short period of time. The reality is, when a company grows too fast, it makes itself vulnerable to a range of problems stemming from not having created a sure foundation to support rapid development. Learning how to scale a business mitigates these risks by ensuring that foundational operations are created that will support growth in the long term.

What is scaling in business? To create a working definition of scaling a business, first consider what it means to start and grow a business. You started your company to fill a need in your market, make a profit and likely fulfill a dream. You need to grow your business in order to keep it profitable and expand your market reach. Many people think of business expansion as “hockey stick growth,” where there is an initial period of linear growth, but once the business hits an inflection point, revenue shoots up sharply.

As alluring as rapid growth can be, entrepreneurs often place their focus on achieving it right away and lose focus on what matters. The problem with that sort of tunnel vision is that it diminishes the importance of the period of linear growth that comes before the rising handle of the hockey stick – that is, the blade. The blade typically lasts about three to four years, and it is where the most important work is being done.

Scaling a business means utilizing this “blade period” to put systems and procedures into place that will prepare you for lasting, profitable development. The blade period is where you establish your core values, your company culture and your brand identity . It’s also where you will develop the client experience you want to provide and create the initial business model when you take your product or service to market. In short, it’s the make-or-break period of any business.

Scaling a business is not easy to do, which is why it should be done as thoughtfully and meticulously as possible. Because in the long run, when you do hit that surging growth curve, you need as solid of a foundation as possible to hold you up. Here are the most important things to keep in mind when figuring out how to scale a business in a mindful manner.

Growth vs scaling up

Let’s begin with the most common distinction between these two terms. In general, we think of growth in linear terms: a company adds new resources (capital, people, or technology), and its revenue increases as a result.

By contrast, scaling is when revenue increases without a substantial increase in resources. Processes “that scale” are those that can be done en masse without extra effort – if I send an email to 10 people or 1 million, my effort is essentially the same. Which is why enterprises use email marketing so heavily. It scales so effectively. (Check out these SaaS email marketing templates for examples.)

Growing a business

Generally seen as the definition of a successful company, growth refers to increasing revenue as a result of being in business. It can also refer to other aspects of the enterprise that are growing, like its number of employees, the amount of offices and how many clients it serves — these things are almost always linked to growth of revenue.

Take for example an advertising agency that currently has five clients, but which is about to take on five more clients. Increasing the number of companies it sells to will bring in more money, but chances are it won’t be able to get the work done without hiring more people.

Companies that offer professional services, like the advertising agency above, will always have to deal with this problem. Taking on more clients leads to hiring more people to support them — while it increases revenue by adding clients, it has to increase costs at the same time.

Scaling a business

The key difference with growth is that s cale is achieved by increasing revenue without incurring significant costs. While adding customers and revenue exponentially, costs should only increase incrementally, if at all.

The difference between growth and scaling becomes most clear when a company isn’t a startup anymore, but is not a large corporation yet, either. At this critical stage the business will have to decide between growing at a regular rate or switching over to faster company scaling.

Further reading for startups!

“Within 30 minutes of speaking to Dialpad, our first operator was providing service to our customers. Within 3 hours, seven operators were up and running without any training… We can grow painlessly on Dialpad and have a reliable system that allows us to be a virtual company.”

Ian Smith
IT Manager at Enova

3. Use software or a platform that scales easily

As well as automation software, you’ll need scalable comms for internal and external conversations. Team members need group messaging, task assignment, and file-sharing—and your customers and stakeholders will want the convenience of communicating across various channels.

It makes sense to choose a unified platform (like Dialpad) with all those tools in one place. You don’t have to toggle between different apps, and teams can work from anywhere since everything’s stored in the cloud.

SaaS solutions are also easy to scale. The subscription model makes it simple to add extra users and features, while paying one monthly fee—and you can integrate existing apps for things like CRM, accounting, and marketing. It’s like having multiple toppings on one delicious pizza.

For example, when ClassPass had to open up new offices around the world to support virtual classes globally, they used a phone system that let them spin up new user accounts and phone numbers in a matter of minutes. (Yes, minutes.)

Source:

https://www.tonyrobbins.com/career-business/mindful-scaling/
https://blog.spendesk.com/en/growth-vs-scaling
https://www.dialpad.com/blog/how-to-scale-a-business/
Growth vs scaling: What s the difference and why does it matter?

Scaling a business

As Tony says, “Business is a sport for gladiators,” but in this arena, there is one metric that stands above all others: growth. Even stock market giants like General Electric and ExxonMobil are under pressure to achieve growth – and not just any growth, but scalable growth .

Scaling a business is a measure of success no matter your size or industry, but it becomes even more important for small businesses and startups. About 20% of businesses fail within the first year – but if you can scale successfully, you’ll set yourself up for the future. In today’s fast-paced landscape, it’s more essential than ever to not only know how to answer the question “ What does it mean to scale a business ?,” but to be able to apply it.

What does scale mean in business?

In business, the definition of “scale” is to increase revenue at a faster rate than costs. Businesses achieve this in a number of ways, from adopting new technologies to finding “gaps” in their operations that can be streamlined. Businesses that are able to add revenue and increase operational demands while maintaining the same costs – or even lowering costs – will be able to scale successfully .

Think of it this way: You run a professional services company, and you just won a $100,000 contract. However, to fulfill that contract, you must hire two new employees at salaries of $50,000 each. You are adding to your revenue, but you’re breaking even in terms of profit margins – you’re growing, but you’re not scaling.

If you win the $100,000 contract, invest $5,000 in a new enterprise resource planning software, and therefore must only hire one employee at $50,000, you’re saving $45,000 – and you’re scaling efficiently.

Growth vs. scale

Growth refers to increasing revenue as a result of new business acquisition. Growth also refers to secondary occurrences that happen due to this acquisition: hiring more employees, expanding office or warehouse space and so on. Growth typically results in even losses and gains. Scaling, on the other hand, means finding ways to grow more efficiently , so that your gains outpace your losses.

growth vs. scale in business

Why is scaling a business important?

Understanding growth vs. scale is essential for all types of businesses. You’ll need to do both in order to succeed. Growing companies experience increased sales volume. Scalable companies are able to improve profit margins even as that sales volume increases. If you grow without scaling , it’s ultimately your customers and bottom line that suffer.

By way of metaphor, think about the process of remodeling a restaurant that’s outgrown its space. The goals of the expansion would be to increase the restaurant’s square footage to accommodate more seating (growth) and create an efficient workspace (scaling). Without both in place, the staff won’t be able to provide flawless service that attracts and retains customers, which defeats the point of growth in the first place.

Determining your business’ scalability

Now that we’ve answered “ What does scale mean in business?,” we’ll apply it to the real world. When is it time to begin scaling a business ? And are there some businesses that are easier to scale than others?

Growth vs scaling up

Let’s begin with the most common distinction between these two terms. In general, we think of growth in linear terms: a company adds new resources (capital, people, or technology), and its revenue increases as a result.

By contrast, scaling is when revenue increases without a substantial increase in resources. Processes “that scale” are those that can be done en masse without extra effort – if I send an email to 10 people or 1 million, my effort is essentially the same. Which is why enterprises use email marketing so heavily. It scales so effectively. (Check out these SaaS email marketing templates for examples.)

Growing a business

Generally seen as the definition of a successful company, growth refers to increasing revenue as a result of being in business. It can also refer to other aspects of the enterprise that are growing, like its number of employees, the amount of offices and how many clients it serves — these things are almost always linked to growth of revenue.

Take for example an advertising agency that currently has five clients, but which is about to take on five more clients. Increasing the number of companies it sells to will bring in more money, but chances are it won’t be able to get the work done without hiring more people.

Companies that offer professional services, like the advertising agency above, will always have to deal with this problem. Taking on more clients leads to hiring more people to support them — while it increases revenue by adding clients, it has to increase costs at the same time.

Scaling a business

The key difference with growth is that s cale is achieved by increasing revenue without incurring significant costs. While adding customers and revenue exponentially, costs should only increase incrementally, if at all.

The difference between growth and scaling becomes most clear when a company isn’t a startup anymore, but is not a large corporation yet, either. At this critical stage the business will have to decide between growing at a regular rate or switching over to faster company scaling.

Further reading for startups!

Key challenges for scaleups

Recent studies have shown a few trends that should perhaps worry CEOs. First, two-thirds of the fastest-growing companies fail. You might think that reaching hypergrowth status puts you on the inevitable path to success. It appears not.

You need investment

This is the most obvious prerequisite: today, most young companies need significant investment (usually from venture capitalists) to scale up. This often comes in the form of series B or C funding.

You need scalable processes

Typical scaleups have a product that scales well – it appeals to buyers far greater than the current market served. But, because they’ve moved quickly as a startup, a lot of internal processes aren’t designed to scale.

The most obvious of these are company expense policies. As a small company, you don’t really need an expense policy. If someone needs to travel or buy something, they can sort it out with the founders directly. But once you have multiple offices and handfuls of people traveling at once, this is simply no longer an option.

You have to embed a company culture

But once you move international, this is much harder to control. You don’t have the same intimacy with new team members, and they can’t feed off the energy and values of the current team as easily.

For this reason, scaleups need to think extra carefully about their employee onboarding strategy. This is the best opportunity to share the company vision, embed the core values, and make sure that new hires are a perfect fit.

Employees need autonomy; managers need control

This should be a guiding theme for all businesses, but it’s especially true in the awkward teenage scaleup phase. Managers and HR teams suddenly have far less visibility over their team members, and they need to be able to trust that they’re conducting business appropriately.

Source:

https://www.tonyrobbins.com/business/scaling-a-business/
https://blog.spendesk.com/en/growth-vs-scaling
https://www.dialpad.com/blog/how-to-scale-a-business/