Scaling seems to be the newest trend in this entrepreneurial lifestyle. We often hear, “I want to scale” or “I’m in the process of scaling”. Are you truly scaling, or is it growth? There is a major distinction between the two terms. Let’s put this in terms that everybody has experienced at one point in life: car maintenance.
What is Growth?
You’ve had a car for several years, but let’s be real, “old faithful” is on its last leg. Yes, the car is paid off, but every other week, it needs major repairs. You may need to get a new engine or transmission or need a new pair of brakes. These repairs (or costs) allow your car to keep running for longer but are hard on your pockets. This is growth. During the growth phase, you steadily spend money on your vehicle because you know you will get more mileage, making it worth it in the long run. The same is true for your business– during the growth phase, you are investing more to coincide with generating more revenue. Growth can look like hiring more employees, purchasing more inventory to meet your demand, or working more hours. In growth mode, we are spending more because we want more revenue and mileage from our business. However, these additional resources are enabling that revenue increase.
What is Scaling?
Our car is now back up and running. We have a few more years on it, and it’s reliable, but we excessively spend on these recurring repairs; at this rate, it will be more cost-efficient to purchase a new car. You may be asking, how is this different? Instead of spending money on unyielding repairs, we use that money to make one major investment in a vehicle that we know will not need a new engine for years to come and has updated premium add-ons. Now, you can use Bluetooth, have a reverse camera, push to start, and warm your seats, all with the press of a button. So, we buy the new car; we scale. Scaling a business means that you increase your revenues and profit margins at the same time by finding ways to be more efficient. This empowers you to continue to build your village and deliver the same level of service without accumulating undue costs. Scaling can look like improving or adding new features to a product, investing in new technology to help automate your systems, or hiring specialists that can take something off your plate as a CEO. Think about this, no matter if you send one email to 20 or 2,000 people, your efforts are essentially the same. Scaling allows us to invest our time and resources in the right places. The goal is to work smarter, not harder.
The Difference/Why does it matter?
According to Linkedin, early growth phases are often where the confusion between growth and scale causes many companies to fail before gaining real traction. Premature scaling is attributed to 40% of failed startups. Being able to multiply successes quickly does not promote sustainable growth. Scaling up to manage growth involves continuously questioning how you want your organization to look – What are your goals in the next 5 – 10 years? How are you currently managing your workload? Do you have the resources, capital, and technology necessary to reach the next level?”
Although scaling and growth are not the same, the two work together to serve a greater purpose. We need to make sure we’re servicing our car and giving the needed repairs to run and take us where we’re going (growth), but we also need to evaluate when it’s time to upgrade our car to have improved fuel efficiency, more space, and a smoother ride (scaling).