When you’ve found success with a business, it only makes sense to take it one step further. If what you’re doing now is working, then why not double your effort to see twice the success? This kind of logic sees terms like “scale” and “growth” thrown around often, but it’s important to understand the difference between the two – so important, that the future of your business may depend on it.
The truth is, not every business is fit to scale. How are you meant to know until you’ve gone too far, though? What advice should you follow to scale successfully instead of fail miserably? Importantly, how can you do it all without losing touch with what made you a success in the first place?
The difference between growing and
scaling.
scaling.
On a macro level, these terms might mean the same thing to you; a company gets bigger than it previously was. However, on a micro level, even if the destination is the same, it’s the journey and the details that make the difference.
Growth…
…means increasing revenue at the same pace that you’re increasing resources to enable that increase. So, if you had a graph with two bars, SPEND and PROFIT, these would both be growing at the same or similar rate.
Essentially – and very loosely – you’d spend £20,000 to make £20,000. Technically your business is growing, but not much value is being gained in the grand scheme of things.
Scaling…
…means increasing revenue at a faster pace than you’re increasing resources to enable that increase. If this was represented in a bar graph, PROFIT would be rising much quicker than SPEND; not at the same rate, which you might expect with typical ‘growth’.
Clearly, businesses should be seeking to scale. Just because it’s the right thing to do, doesn’t mean it’s the easy thing to do, though.
Typical growth is easy because, as long as you have the money, you can typically just do what you’re already doing but do it more. To scale is to think smarter because you can’t just increase your output, you need to improve your output.
However, not all businesses are able to scale – or even suited to it in the first place. To help you better understand where your business falls, we’ve put together three different categories that every business falls into.
The
three types
three types
of scaling businesses.
Just like any balloon has a breakpoint when it expands too quickly, so does a business and it’s better to know what it is before you find out firsthand. You can do this by finding which of these three categories your business fits into:
Struggle to scale
For example, if you run a business that sells couches, there are a lot of overheads to consider when expanding; paying for more materials, hiring more staff, buying more delivery trucks, renting more properties, etc.
In this case, there’s a lot of money that needs to be injected into the project to bring about that increase, meaning it’s more ‘growth’ than ‘scale’.
Simple to scale
Instead, for a tech start-up that runs a new social media platform, scaling their business might simply mean an increase in server costs and hiring one or two additional staff. In this circumstance, scaling would be much easier.
Shift to scale
We’ve covered the hard to scale and the easier to scale, but there’s a third category where you can’t scale without shifting the nature of your business.
A great example of this would be a one-woman business that does portraits full-time, where her success is built on her personal reputation and her specific skill set. When this is her main occupation, she can’t simply find more hours to do more work.
One of the only ways she could scale is to shift what her business is and instead hire other artists to do the portraits alongside her, but in doing that she’d change what made her business a success in the first place.
Knowing if you should scale
(without reaching your breakpoint)
(without reaching your breakpoint)
To figure out which category you fit in, think about where your current resources are being spent to keep you where you’re at, then think about where you want to be in five years and how those resources would need to stretch to get there. Looking at your finances and seeing all of your overheads laid bare can help a lot at this stage.
With that in mind, ask yourself these questions and keep track of how many of them you answer ‘yes’ to:
- Are your customers returning?
- Are your profits increasing?
- Is your industry healthy?
- Can you automate parts of your business?
- Is your success consistently repeatable?
- Is the increased interest for your increased output?
- Will you love what it becomes?
- Are there new industries or locations you can expand into?
- If things go wrong, could you return to how things were pre-expansion?
- Can you grow twice as large without hiring twice as many people?
Let’s take a look at what your answers mean…
Did you answer 0-4 of these with “yes”? Now might not be the time for your business to scale. Wait a few more years to establish more of a foundation that you can then build on.
Did you answer 5-7 of these with “yes”? Proceed with caution, but you could be in a good position to expand your business without losing touch with what made you successful in the first place.
Did you answer 8-10 of these with “yes”? You’re in a fortunate position where your business sounds primed for expansion and scaling, which not many companies can claim to be in. Nothing is guaranteed, but you look set to succeed.
Tips on scaling
your
your
business
So, you’ve decided that scaling your business is the right thing to do – but how can you do it right? We spoke to some businesses that succeeded and failed in scaling, and have shared some of their pearls of wisdom below.
- Automate as many processes as possible
Unfortunately, doubling your output as a company doesn’t mean doubling your amount of free time to fulfil it. In fact, it means the opposite. That’s why you’ll need to automate as many manual tasks as possible to save time where you can.
- Don’t just scale marketing, scale your business
Many businesses have made the mistake of simply increasing their marketing spend to bring in more leads. This can quickly see you become overwhelmed with work, and there’s nothing more frustrating than getting leads you can’t fulfil. By making sure your available resources increase with the pace of your leads, you should be equipped to deal with the demand.
- Create a recurring revenue stream with minimal upkeep
This might be easier said than done, but this again comes back to the idea of maximising profit and minimising time spent. By finding a recurring revenue stream like this, you can also make your business more stable as you’re not reliant on one-off investments.
- Learn from competitors
Your competitors – or at least someone in the same industry – will have likely gone through what you’re going through now, and they’ll have given you plenty to learn from. Pay attention! Importantly, don’t just learn from those that were successful, but from those that failed too.
- Don’t be stubborn
We may have warned you about the dangers of changing your business too much and losing sight of what made you a success in the first place, but you can also be too stubborn. Obviously, this is a case by case basis and it’s hard for us to say something that applies to everyone. Just remember that Kodak thought digital cameras were a fad and blew their lead dominating the photography market for decades.
- Read the industry
Is it on the rise? Are there sub-niches you can pivot into? Is there room for an even bigger version of your current business to exist? You don’t want to assume that your field is ready for you, so read the data, speak to the influencers and look at the forecasts.
- Importantly, avoid shortcuts!
Slow and steady wins the race. When businesses can take decades to build and weeks to crumble, you need to be careful that you’re not running before you can walk.
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We said it before and we’ll say it again; to scale is to think smarter because you can’t just increase your output, you need to improve your output. When you understand what you can do to outpace your output with your input, you’ll be set to scale your business at a rapid rate and take it up to the next level, turning your competitors into followers.