Growing your business and scaling it up can seem like the same thing, and if you were to look at a graph showing scale and growth, they would undoubtedly look similar. However, ask any entrepreneur, and they’ll tell you that they would rather scale up their business than experience growth.
It might seem confusing, but you can learn about the differences between these two terms and how they relate to your business below.
Reducing Your Costs vs. Increasing Your Costs
There can be stark differences in the costs associated with a business experiencing unprecedented growth and one that’s scaling up. For example, your automated accounts payable balance might dramatically increase during periods of fast growth, but you might notice a gradual increase in that balance if you control growth and scale your business up over time.
A business that scales up might also be able to spend time working out how to reduce the costs of their products and services to boost their profits, such as by finding cheaper labor, lowering equipment expenses, or even negotiating better shipping rates.
When you’re going through a period of high growth, there can be greater urgency to increase production and less time to focus on how to reduce your costs.
Hiring Priorities
The way a growing company and a scaling-up company will hire people can be dramatically different. Many companies experiencing growth will employ people to overcome any challenges or weaknesses.
For example, if there are gaps in their supply chain, they might hire someone to plug those gaps, even in the face of that supply chain requiring a complete overhaul to ensure it’s efficient and effective.
In contrast, a company that wishes to scale up will hire people to strengthen its market position. For example, they might already have a competent marketing team, but they want someone who can take their ad campaigns to the next level.
The Founder’s Role
In many situations, a founder in a growth company will involve themselves in the decision-making processes of all departments, right down to employee benefit decisions and strategies for growth.
However, many other business owners who scale-up will take a different approach. They might mentor their employees to be responsible for their own decisions and even delegate decision-making to those in charge of each department.
The Company Priorities
Two companies can look identical in their products and services, but their priorities can set them apart. A growth company might prioritize improving sales, so they market through traditional avenues with promotions and customer deals. This can lead to a rapid increase in demand, but one that might taper off with time.
In contrast, a scaling business might utilize more contemporary marketing methods like SEO and social media. Sales might be slower to take off, but growth can be consistent while brand recognition improves.
Profit Margins
Gross profit tends to be lower in growing companies, particularly as expenses can be much higher. The increased revenue might look good on paper, but the profit margin might not be as high as anticipated.
The steady process of scaling up can allow for a higher gross profit and reduced expenses. Such companies often leverage their existing teams’ capabilities and take their time to build up their company to keep costs low and customer satisfaction and orders high.
As similar as growth and scaling up can be, these two terms are not the same. Scaling your business is often much more sustainable. However, as always, your mileage may vary. So, do your research, and apply a strategy that fits your goals for your business.
