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, the effort remains the same whether you send an email to 2 people or 20 000 people. Therefore, if you send to more, you do more without extra effort. A technological upscale would be, for instance, when a company moves over to a cloud-based phone system.
- 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 is linked directly to increased growth of revenue. 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 client base. However, this demands that the agency hire additional staff. Otherwise, they will not be able to effectively service their new clients. Nevertheless, with growth also 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 in that hiring more staff means more outlay of expenditure.
- Scaling a company or a startup. This 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 but without increasing substantial costs. Therefore, as the new business adds more clients to their client base, their income will swell massively, whereas their 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. As they added more clients, from ad-supported free users to paying corporate clients, they kept expenses minimum.
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 will need to choose between growing at a steady rate and switching over to faster business scaling. Unfortunately, there is no clear-cut formula to 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 will not succeed. The key to scaling is doing it smartly and knowing the difficulties that startups can face.
- 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 work out whether your product will be viable and a market fit − these two aspects are vital if you want to source funding.
- 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 are a result of organic evolution, in which the core staff is small and manageable. However, as the company grows, especially if it enters an international market, keeping control becomes problematic. It can also mean that the excellent embed company culture can be at risk of being lost. Onboarding new staff members can interfere with this; however, 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 to scale instead of growing?
A vital tip for scaling is to invest in the company culture. This is by making sure that the new talent does not slip away and move to the competition. One of the most important things to note is that employees are looking for a good quality of life rather than simply a standard lifestyle. This means that your employees want more than just a hefty paycheck – they want to feel valued. Therefore any practices which can lead to burnout will destroy this relationship.
Also, entrepreneurs need to 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 learn how to delegate. In terms of delegating, CEOs and managers need to fire themselves from doing the laborious work. They can then focus on their real talents, achieving their core work effectively. The solution is simple − hire a remote assistant to take over these mundane tasks, in most cases simply admin tasks. Also, a virtual assistant or VA can accomplish such functions at far less cost than the cost of your own time. Hiring a VA is thus a cost-saving, not an expense.
You need to ensure that 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 businesses 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 that this article has helped explain the nuances around the two terms of growth and scaling. Both actions are vital − the dissimilarities for businesses 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 planning. Speak to our outsourcing expert and let us help you. Book your free consultation today!