For proven businesses, growth is essential, and maintaining a steady growth rate is even more critical. However, the focus is different for startups – here, the focus is on scaling and where the growth needs to be exponential. The analogy is seen in teaching a baby to run before even walking. Yet, a key focus of startups is to build their product, craft a robust brand identity, and establish a market; then, they can consider hyper-growth.
Here, we will delve deeper into the difference between scaling and growth and why it matters. Also, we will look at some prominent scaling challenges and note what businesses should do to achieve an exponential growth rate.
What is the difference between growth and scaling up?
When you think of growth, you assume a linear process determined by adding more resources, such as talent, capital, or technology, linked to increased return on investment (ROI).
Scaling, on the other hand, occurs when revenue increases but without a significant escalation of resources. For instance, whether you email two people or 20,000 people, the effort remains the same. If you send more, you do more without extra effort. For instance, a technological upgrade would be when a company moves over to a cloud-based phone system.
- It is growing a company. Growing a business implies increasing revenue, but it also means expanding the number of employees, franchisees, and other outlets, acquiring a more extensive customer base. However, all of the latter are linked directly to increased revenue growth. Yet, this type of growth requires various resources to maintain a constant growth trajectory. For instance, a marketing agency has ten clients, onboarding a further 10, thus doubling the company’s client base. However, this demands that the agency hire additional staff. Otherwise, they will not be able to service their new clients effectively. Nevertheless, with growth comes financial losses − these are not separate terms. For instance, when the marketing agency hires additional staff, such staff will reduce the company’s revenue because hiring more staff means more expenditure.
- They are scaling a company or a startup. But what is scaling up? Scaling up a business has much to do with the association of costs linked to growth, encouraging many modern startups to explore the concept of scaling. The main difference between scaling and growth is that scale is obtained by growing revenue without increasing costs. Scaling up means the new business adds more clients to its client base, and its income will swell massively, whereas its costs will only increase marginally if there are, in fact, any cost increases. Google is an excellent example of a company that has achieved perfect scaling. They kept expenses minimal as they added more clients, from ad-supported free users to paying corporate clients.
The main difference between scaling and growth occurs when a business is between a startup and a large corporation. This is a critical phase for the industry, as the company must choose between growing steadily and switching over to faster business scaling. Unfortunately, there is no clear-cut formula for significant scaling, as it depends on the type of business and the market. However, there are some factors to keep in mind.
What are the challenges to those who want to scale up?
The reality is that two-thirds of new businesses will fail. But also, research has shown that those companies that scale using a slower process have a better chance of survival. This does not, however, mean that fast-growing businesses or those that scale up fast will not succeed. The key to scaling is doing it smartly and knowing startups’ difficulties.
- Investment is vital. It might seem obvious, but businesses need investment: startups typically source such from venture capitalists in scaling their businesses. However, there are also other funding models, such as crowdfunding. Irrespective of the model used, you need to determine whether your product will be viable and a market fit − these two aspects are vital if you want to source funding.
- They are using a scalable process. Startups tend not to accommodate scalable processes since there is a need to move quickly. However, systems must be developed. Such systems do not need to be expensive, as admin functions can be handled by a virtual assistant, which is a cost-effective staffing solution.
Is your staff ready to scale?
Most startups result from organic evolution, in which the core staff is small and manageable. However, keeping control becomes problematic as the company grows, especially if it enters an international market. It can also mean that the excellent embedded company culture can be at risk of being lost.
Onboarding new staff members can interfere with this; hiring outsourced staff to do time-consuming work will support the core staff. This is an alternative approach in which the core staff culture remains intact while the job is done.
How do we scale instead of growing?
A vital tip for scaling is to invest in the company culture. This ensures the new talent does not slip away and move to the competition. One of the most important things to note is that employees seek a good quality of life rather than simply a standard lifestyle. Your employees want more than just a hefty paycheck – they want to feel valued. Any practices that can lead to burnout will destroy this relationship.
Also, entrepreneurs must question whether they are the right person to be the company CEO. This is a difficult question for many; however, you will all fail if you can’t lead the team. Courses are available to avert such an outcome. We suggest Mads Singers’ Effective Management Mastery course that can be taken to learn how to manage people effectively. This involves how to motivate, how to hire and fire staff, and how to delegate. In delegating, CEOs and managers must fire themselves from doing the laborious work. They can then focus on their natural talents, achieving their core work effectively. The solution is simple − hiring a remote assistant to take over these mundane tasks, usually administrative tasks. Also, a virtual assistant or VA can accomplish such functions at far less cost than your own time. Hiring a VA is thus a cost-saving, not an expense.
You must ensure you do not lose focus on your core values. It is your values that set you apart from your competitors. However, as you focus on your core, your business strengthens. Many new companies have adopted scaling. Businesses often need to diversify. However, this action can dilute your strength: spreading yourself too thinly leads only to failure.
Investing in outsourcing can help any company wanting to upscale. Outsourcing allows for flexibility in onboarding and offboarding staff, gaining access to skills that the company lacks. These skills can range from graphic design to customer support.
Grow, scale, and flourish!
We hope this article has helped explain the nuances around the two terms of growth and scaling. Both actions are vital − business dissimilarities are frequently a matter of timing. Still, there are steps companies can take to organize themselves for the scale-up stage. Start with transparent processes, make info voluntarily accessible from anywhere, and learn how to delegate effectively. From there, fruitful scaling is part of planning. Please speak to our outsourcing expert and let us help you. Book your free consultation today!