Growth and scaling are not interchangeable. And simple growth will not automatically mean an increase in your revenue.
Growth is adding resources or infrastructure to handle your company’s increased demand, at a cost which is more or less equivalent to the level of increased revenue you have coming in. Good examples are traditional service business models – professional services, contractors, retail stores, etc. For these models, in order to bring in more revenue, you must continuously add more resources to your business. Are you adding more employees to serve an increased number of clients? Do you need a call answering service to handle increasing calls and appointments? Are you searching for a new location to capture a new segment of the audience? Essentially, with growth, you have to “spend more money to make more money.” And this isn’t an uncommon business model. Many entrepreneurs employ this business model unconsciously.
It doesn’t require a significant increase in spending to trigger a significant increase in revenue. Scalable companies like Google, Facebook, Amazon – don’t grow, they scale. And these companies add large numbers of new customers without having to hire large amounts of new employees to handle their increase in customers.
Adding resources costs money that cuts into your revenue. Scaling is achieving business “growth” by scaling your service or product in a way that additional resources aren’t required to sustain your growth. And this means your profits soar.
Scaling – Sustainable Growth
In order to build for sustainable growth, you need to assemble an organization that can achieve and maintain that growth. And that means implementing the 8 Essential Primary Internal Practices and the 4 Essential Primary External Practices. Create your initial business plan as if your company will achieve $50 million in revenue within three years. And develop the organizational structure and strategies you would need to accomplish and support this growth.
These are also the practices that your business has to successfully execute in order to attract and secure quality investors.
How can I scale my business?
Reducing the cost of incremental sales is the key to scaling your business. Can you locate aspects of your business that can be replicated quickly and cost effectively? If your next sale requires as much time and effort as every sale before it, then your business model is not scalable.
Think about the current delivery of your product. How can it be automated to allow you to produce the product faster and cheaper for every additional customer who buys it? Search for scalable processes in your business model like outsourcing call answering, sales funnels, email and social marketing automation. Are you shipping a product? Can you ship to a centralized distribution center rather than drop shipping directly? How many options have you considered?
Implementing the 8 Essential Primary Internal Practices and the 4 Essential Primary External Practices. Building a team with a broad management skillset is important. Yes, even to a small company doing less than $1 million a year. Every company must have all of these elements in place to ensure it will become highly profitable in its own right.
Do you have a team in place to answer these questions?
- Which of your advertising media is generating the best return for your dollar spent?
- What is your sale forecast for the next 12 months? How did you arrive at that figure?
- Where are the greatest risks to your planned profit target for this year and what actions could be taken this month to reduce that risk?
- Is your strategy driving your strategy? Or is the way your operations manager allocates your resources driving your strategy?
- How are you staying current and ensuring compliance with employment laws? Company benefits?
- Are you using your ERP to ensure your company is performing to your plan’s expectations?
Which is right for my business?
It’s a personal decision every entrepreneur has to make. Being able to quickly multiply successes is not the same as scaling. Growth for growth’s sake will end up consuming all the time, resources and money within your businesses without delivering sustainable benefits in the long-term.
And scaling without a solid management team in place will create out of control growth and a no-win situation for you.
Are you ready to scale your business?
If you want to learn more about the 8 Essential Primary Internal Practices and the 4 Essential Primary External Practices, shoot me an email, I’d love to hear from you!
Until next time,
To Your Growth & Profits
William De Temple, CEO Antirion LLC
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Growth vs. Scaling - Fundable. Available at: https://www.fundable.com/blog/post/growth-vs-scaling The Difference Between Growth vs Scaling | Conversational. Available at: https://www.conversational.com/the-difference-between-growth-vs-scaling/ What does it *actually* mean to scale your startup? Available at: https://productive.speedlancer.com/what-does-it-actually-mean-to-scale-your-startup-8cc17682b28e