Growth vs Scale: What’s the Difference & How to Grow or Scale Your Business

After developing a market fit product or service, your goal is to take your business to the next level.

Growing and scaling a business is not easy as they are spoken. According to a research by Harvard Business School, 50% of startups fail after 5 years of launch, and 70% fail after 10 years. This clearly shows startups fail at the growth or scaling stage.

Most people confuse between scaling and growth. Even though they have the same meaning of expanding the revenue, they are different.

This blog offers a comprehensive take on scaling and growing and helps you understand how you can prepare your company for growth and scaling.

Let’s get started.

What is scaling?

Scaling a company means increasing the revenue quickly by investing minimal significant resources.

While scaling a business, the rate of increasing the revenue will be exponential and the resources like time, money, and employees for scaling are kept minimum.

For example, let’s say you have a company with $10,000 monthly revenue. Imagine doubling the revenue within the next two months without expanding your team or resources. This is scaling. That is, you boosted your revenue within a short time and without spending too much.

Examples for scaling

One good example of scaling a business is Google. Google increased their revenue by leveraging advertising opportunities for businesses to promote their services on search engine result pages(SERP). Companies pay for the clicks their ads receive.

Likewise, PayPal and Salesforce have scaled their business with minimum investments. Paypal attracted more customers by charging less and offering referral bonuses to existing customers. Paypal increased its customer base by 10% daily by this process.

What is growth?

Growth refers to an increase in revenue and resources like people, things, space and more. To grow a business, you need to manage these resources effectively.

For instance, when you acquire two or more new projects, you need to hire a new team to manage these projects, which increases your investment in resources. You have to spend considerable resources to achieve your revenue goals in growth.

For example, let’s say a new project could increase your revenue from $10,000 to $40,000.

And to achieve that revenue goal, you will have to spend $15000-$20000 on resources. So the net profit will be impacted by the amount you spent on resources, and it may take longer to generate the targeted revenue.

Examples for growth

Uber is an excellent example of growth. Every time Uber expands to a new location, it increases the number of driving partners. So the overall profit value won’t improve exponentially, but they increase gradually.

Some other examples are brands like Microsoft and Yahoo that have grown over the years by spending a lot of resources for expansion.

Growth vs scale – Understanding the difference

As growth and scale point to the improvement of a company. The goal and the method of achieving the growth will be completely different.

We have listed 5 key differences between growth and scale.

1. Company priority

Growth: The companies that focus on growth will reach customers through traditional marketing channels to improve sales. Companies attract more customers by offers, promos and fulfilling their demand.

Scale: Companies that tend to scale focus on marketing through modern channels like social media and SEO marketing and improve their sales. For example, you can send a single e-mail to thousands of people to know about your product or service.

While scaling, companies concentrate on the holistic customer journey from start to end to optimise each touch point.

2. Primary focus

Growth: Growing companies focus more on survival since the gross profit for growth will be low.

Scale: Scaling companies always focus on consistency, improved solutions and service more than survival. They look to improve their revenue faster with minimal resources.

3. Priority in hiring

Growth: In growth, the companies always hire people to overcome weaknesses. For example, if the company lacks talent in marketing, it will hire a marketing expert and a marketing team to tackle the weakness.

Scale: Companies that scale prioritise hiring to strengthen their presence in the market. For example, an Artificial Intelligence startup focuses on hiring more people who have expertise in the AI domain.

4. Role of founder

Growth: Founders in growth companies always focus on multiple tasks like involving in many departments decisions, implementing the growth strategies and planning employee benefits.

Scale: In scaleups, the role of the founder will be completely different. Here, they will focus on strategising the growth, mentoring employees, delegating the vital decision making to department heads and more.

5. Gross profit

Growth: The gross profit is low in growing companies. The expense in these companies will be high and need many resources.

For example, if you run an advertising agency and acquire new customers, you need to hire more people to complete the projects on time.

Scale: The companies that scale have a very high gross profit with minimal expenses. The scaleups leverage the capabilities of their existing team to increase profits.

For instance, a mobile application is an initial stage product to scale up; you can update the application’s features to serve more customers and scale faster.

How to scale a business?

Before scaling a business, you need to identify whether your business is ready to scale. All business types are not meant to scale up. Take a look at some business model examples that will help you scale up.

So let’s get started on how to scale up.

1. Evaluate your current stage

Take a look into your business and identify the weak points. Try to strengthen the more vulnerable areas. Try to understand if your business is ready to scale.

Let’s say your client base got doubled or tripled.

Will you be able to handle them with your current number of employees?

If the answer is no, then you will need to expand the size of your team in line with your client requirements.

2. Plan your scale-up

After evaluating if you are ready to scale, start planning the scale-up.

• • • Set a yearly target
    • Break down the target to monthly goals
    • Specify the number of new customers you need to scale up
    • Include the resources required to complete the projects
    • Include the expense for the resources
    • Mention the revenue you acquire
    • Calculate the profit

There are three possibilities if you move without a plan:

• • • Accidental success
    • Business failure
    • Stuck in between the process and not knowing where to go or how to move forward.

3. Attract money

Scale-up needs minimum investment, which doesn’t mean you don’t need any resources. For every resource, you need to pay. You will need an investor to keep you afloat. One of the best ways to attract investors is creating an MVP and bagging early adopters.

Also Read: 17 Vital Factors Venture Capitalists Evaluate Before Investing in Your Startup

4. Acquire more sales

You need to acquire more sales to scale up. For more sales, you need the following resources:

• • • An efficient marketing team
    • A foolproof marketing strategy
    • A good number of leads
    • An automation system to manage sales related queries
    • Sufficient amount of sales representatives
    • A right billing system

5. Investment in technology

When you scale, the work also increases. There are many automation services available in the market which provide value.

So if you are planning on social media marketing, you can check out a lot of tools like Hootsuite, Buffer etc. These tools will help you plan and publish your content seamlessly. In addition, you can rely on automated tools for CRM, marketing, sales management, accounting, HR, shipping and more.

6. Deliberative hiring or outsourcing

When the business scales, there will be a need for more people. As we rely more on technology, we need people to handle the technology correctly. So while expanding, decide beforehand whether to hire in-house or outsource.

There are a lot of benefits in both in-house and outsourcing. But try to decide what parts of your project to outsource beforehand.

Outsourcing will give you the benefit of a large pool of talents you can choose from. Hiring in-house will provide a connection between the employee and the company.

So be strategic while deciding which roles to outsource while scaling up.

Also Read: Outsourcing Vs. Offshoring: What is Right for Your Business?

How to grow a business?

After developing a market fit product or service, the next step is to grow your business. There are many do it. Some of them are:

1. Attract new customers

You can attract new customers by offering cash coupons, promo codes or any other discounts. Market yourself effectively.

2. Concentrate on your digital presence

Modern business growth demands an impactful digital presence. Get involved in social media to promote your services and interact with your customers.

Place your ads on appropriate social media channels. Stay ahead of the trend by experimenting with new content formats that help people connect with your brand.

3. Expand your business through acquisition

You can acquire a competitor business and merge it into your brand to increase your customer base rapidly.

For example, Facebook bought Instagram and WhatsApp and integrated them into their platform. This move proved to be a success as it helped Facebook bag a massive customer base.

4. Expand your team

Expand your team according to the requirement of the projects.

Try to include talented people in the leader position to manage teams effectively. One leader can pull the best out of the team members; you just need one good team member to do that.

5. Add new products or services

Introduce a child product or service along with your core product. Like Facebook and Messenger, you can provide integrated services for better growth.

Read more: Top 15 Strategies to Quickly Grow Your Company

Key challenges in scaling & growing businesses

Every big business was once a humble startup. They implemented growth strategies and scaled up their business to the next level.

Suppose you are planning on scaling or growing your business. You have the advantage of learning from the mistakes the pioneers made.

Let’s look into the key challenges you may encounter while growing your company and how to avoid them.

Incorrect timing

You need to be cautious about when you scale your business. Many companies scale before they develop a market fit product.

Sometimes the company won’t be ready to accept more projects.

To make sure you are ready to scale up, ask the below questions:

• • • Do you have an adequate workforce?
    • Will the company be the same after you scale up?
    • Do you have a source for the cash flow?
    • Do you have the right technology to scale up?
    • Is my industry booming? Is this the right time to scale?
    • Can you rely on your team to make decisions without your involvement?

Based on the answers, try to scale when you are really ready.

Hiring

While hiring to expand, concentrate more on quality rather than quantity.

Many companies hire more people to acquire more projects, but it is essential to employ well-skilled people.

It takes a lot of time and resources to hire people. Hiring an incompetent individual will leave you in a loop searching for the same position.

Find people who understand your goals and focus. While hiring people for key positions, make sure they are well balanced in skill and experience.

Change of environment

As a startup with a minimal workforce, you can easily provide a work-friendly environment. While scaling and growing, it is really a challenge to maintain the same environment for a more extensive community. Ensure that you have a well-organised company structure and people operations department to keep your workplace productive & friendly.

Inadequate cash flow

Cash flow is a crucial factor for development. While scaling, you need an adequate cash flow.

Without proper cash flow, you may get stuck in between, and many startups fail because of it. Make sure to have a good cash flow before scaling to pay the employee on time.

Failing to change

While growing, your company becomes big and will serve an extensive customer base. Sometimes while expanding and with time, the main focus will need a slight change.

Be sure you change according to the trend and sustain in the market. Let’s take the example of Nokia. When they refused to accept Android, the market didn’t even care to buy their phones.

Differentiate sales and marketing

Many organisations fail when they are unable to differentiate between sales and marketing. Try to launch the sale and market in different rockets.

Because they are different. Marketing lets you reach your target audience using different channels. In sales, you convert your target audience to customers. So have separate marketing and sales plan to increase your revenue while scaling.

Read more: 7 Startup Challenges to Avoid When Scaling Your Business

Conclusion

It is essential to understand the concept of growth and scale when you want to take your business to the next level. There is a difference between growth and scale –  from company priority goals to gross profit. Be sure about your timing, readiness, and cash flow to plan your expansion well.

Also Read: Growth Hacking for Startups: 17 Strategies to Boost Conversion