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Growth vs. Scaling

Business

Michael Fisher

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Growth — Become larger or greater over a period of time.

Scaling — Represent in proportional dimensions; reduce or increase in size according to a common scale.

It’s easy to mistake them for being two different ways to talk about something that’s becoming larger, but there’s a key difference:

What is company growth?

Generally seen as the definition of a successful company, growth refers to increasing revenue as a result of being in business. It can also refer to other aspects of the business that’s growing, like its number of employees, the number of offices and how many clients it serves — these things are almost always linked to the growth of revenue.

The biggest problem, however, is that it takes a lot of resources to sustain constant growth.

Take, for example, my mobile detailing company that currently has twenty-five clients; however, I’m about to take on another twenty-five more clients. Increasing the number of people I sell to will bring in more money, but chances are it won’t be able to get the work done without hiring more people.

Because of this, financial growth can only be achieved while making larger losses, too.

Companies that offer professional services, like my company above, will always have to deal with this problem. Taking on more clientele leads to hiring more people to support them — while it increases revenue by adding clients, it has to increase costs at the same time.

It can also trouble other kinds of businesses, especially those that didn’t do the math on their business plan. If you haven’t figured out exactly how you can increase the amount of money you’re making without it making a comparable impact on your costs, chances are you’ll become subject to stagnated growth.

What is scaling?

As we’ve learned, traditional growth is riddled with problems. Instead, it’s much more interesting for companies to focus on scaling — a way to grow without being held back by increasing costs.

The key difference with growth is that scale is achieved by increasing revenue without incurring significant costs. While adding customers and revenue at a quicker rate, costs should only increase incrementally, if at all. A great example of a company that’s successfully figured out how to scale is, “Google, which in recent years has been adding customers (either paying business clients or ad-supported free users) while being able to keep costs at a minimum. As of 2017, it had seven products with over a billion active users each, while only employing about 88,000 people.

To find scalable aspects in your business model, you must first locate the aspects of your business that can be duplicated quickly and cost-effectively. If your next sale requires just as much time and effort as the one prior to it, then your model is not scalable.

Software companies are great examples of a scalable business model. Once the costly development stage is complete, the company who made the software can sell as many copies as it wants as fast as it needs to with very little overhead cost. This is the very building block of scalability.

Think about how the delivery of your product could be automated in a way that would allow you to produce the product faster and cheaper for every additional customer who buys it.  The more efficient your mechanism for mass-producing the product, the more scalable you will be. The most useful trait of the fastest-growing companies is their ability to understand how to replicate the value of their solution very quickly and inexpensively.

Take away?

Scaling reduces the amount of time it takes for a small company to become a big company, meaning that without scale, you may be a sitting duck.  Companies that find ways to grow their service offering exponentially can outmaneuver larger competitors because they are not locked into the same slow growth cost structure.


Michael Fisher

I am a young entrepreneur that has no ceiling for a success, I truly live skies the limit. I’ve made it my life’s mission to start my own business and create a job economy in the urban community. In conjunction to creating jobs. I want to be known as a mentor as well as guide towards empowering the urban community to achieve financial freedom.
http://fb.com/magicmikesmobil/

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