The Difference Between Growing And Scaling Your Business

Linkilaw Startup Advice & Tips

Many tend to speak about growing and scaling their business interchangeably. However, the two are actually quite unique and the difference could mean the success or failure of your business.

What is the difference between growing and scaling your business?

Growing is usually referred to as an increase in revenue, but it can also represent growth in the number of employees, amount of offices, or the number of clients of a company and so on. Growing occurs when you’re increasing sales at the same time as increasing the costs associated with it. When a company is growing, this ratio of sales or income to overhead costs stays constant. This means that financial growth, what most companies are striving for, can only be achieved while also incurring greater losses.

Scaling, however, is growth related to a common scale. This occurs when a company’s revenue increases without having to increase their operating costs. This is achieved by increasing revenue without incurring a great cost at the same rate.

Growth tends to be what most people are actually referring to when they speak about growing their business, and it’s what most should be striving for.
Many confuse these terms and the goals associated with them at early stages in their business, but the difference between them will really become clear as a company starts to grow beyond the startup phase. It’s at this point that small decisions your company makes will have huge impacts on the rate your company grows and how successful they will be in competition with other similar businesses. By scaling rather than growing, many companies are able to reduce the amount of time required for them to increase in size, influence, and power.

There’s no one clear path to scaling, but in order to scale, the same amount of resources to the previous sale must not be required every time you make a new sale.
Businesses that will be able to scale successfully tend to have a predictable revenue stream that is diverse in nature, high customer retention rates, and incorporate a value ladder into their business that allows existing customers to climb up a ‘ladder’ of products or services you can offer them.

If you’d like to scale your business, the main thing to focus on is increasing the value of your product rather than the price. By increasing the product’s actual value first you will justify an increased cost later that is sustainable. Also necessary is to reduce the cost of incremental sales. Do this by locating aspects of your business that can be repeated quickly and cheaply and find ways to automate the process.

Although scaling may sound like a magical elixir that could have you earning more money quicker, be cautious about scaling too quickly. To be successful you also need to scale in a way that is sustainable in the long-term. Bad processes are only made more obvious and damaging once you begin scaling them, so be sure your processes are as error-proof and efficient as possible before you begin to scale. In order to scale successfully, every piece of your business needs to have a repeatable, predictable process.

Scaling is never a one and done task, it is an endless process that should always be pushing your company forward. I hope this helps you and your business! If you need any legal advice, you can book now a call and our legal team will guide you through every stage of your legal needs.