It’s easy to think the terms scaling and growing your business mean the same thing, and in many circumstances these terms are used interchangeably by business leaders, but scaling your business and growing your business should never be confused. They are very different, and we are going to explain why.
Business growth means increasing your top line revenues, your market share and your workforce at any cost, whereas in contrast, scaling refers to increasing your revenue without significantly increasing your costs. You might consider a bigger business to be better and more successful, but this is often not the case when you dive into the figures.
The simplest example of scaling is email marketing – if you send an email to 50 people, or 1 million, the effort is the same, and costs are also similar which is why so many businesses are successfully scaling using the power of email marketing to reach their audience.
Scaling is the process of creating sustainable growth that does not impact on your bottom line, and ensures your business remains successful and efficient over a long period of time, but it can be difficult knowing where to start with scaling (don’t worry, there are tips coming later in the article!).
All businesses are different and however you chose to expand your business, either through growth or scale strategies, will depend on your unique business goals. However, as your business matures, scaling is certainly a smart way to expand your business as you’re delivering the same products and service without it costing more, usually done by investing in new processes and technology to deliver long term return. Most businesses would love to see revenues increase, because on the surface that indicates a successful business, but to scale makes your business model more viable in the long run.
It may seem as though we have pitched scaling against growth, but growth strategies have a time and place, and for ultimate success the two should go hand-in-hand. For start-ups, growth strategies are essential and confusion between growth and scaling at this stage can cause big problems. 60% of start-ups across the UK are known to fail within the first five years because they’ve attempted to scale too quickly, before they have gained any traction. To grow successfully, businesses need processes and structures in place which are designed to scale, and this is where the two really work together, but every good business must start with growth first and foremost.
When it comes to scaling your business, initially you may have to invest in the business to help it scale, which can affect profit margins temporarily, but when you’re scaling, you are playing the long game. Let’s look at some successful strategies you can use to scale your business:
Employees are one of the biggest costs for businesses, and on average, amount to 64% of total expenditure, but they are one of your most valuable assets and should be treated as such. Are you getting the best value from this expenditure? When evaluating your labour costs, consider how you can be smarter – for example, could you outsource areas of your business to specialists who would reduce your staffing overheads and give you a specialised service such as a marketing freelancer or accountant. Or training your employees to cover new areas.
Staff turnover is another area of high expenditure, and research has highlighted the average cost of an employee leaving is upwards of £30k. Therefore, keeping your employees satisfied will in turn reduce employee turnover and improve your margins, helping you scale.
Automating as many areas of your business as possible such as marketing, accounts payable, payroll and project management will standardise your processes, drive efficiency and save money longer term and will allow you to focus your efforts on other business opportunities. Automating your business means implementing processes which will help your scaling efforts – for example, when you automate your marketing activity the time and cost involved in reaching 50 prospects is no less than reaching 5 million if your process is automated.
Do you have the tools in place to give you the data needed to make smart business decisions, at the right time? Robust business software is vital when you are looking to scale your business, and despite the initial outlay costs, the return on your investment can be significant. A good business solution will give you centralised, real-time data, accurate reporting, and increased visibility, and will scale up with your business, rather than restrict it.
The end goal for any business is to make money, but getting the balance right between increased revenue and increasing costs can be challenging. That’s why, it is vital to maintain a steady growth initially, and once your business has gained traction, look at implementing scale strategies which will expand your business sustainably and keep your profit margins healthy at the same time.
Here at Pegasus, we offer a number of award-winning business software solutions that can help you scale your business. For more information, or to discuss your business in greater detail with one of our experts, please contact us today.
Posted On: September 07, 2023
