Growth and Scaling 101
Where do you want your business to be five years from now? How about in ten years? If you haven’t thought this far, you’re not alone. In 2018, only 63% of businesses surveyed reported they had planned for more than a year in advance. Though more than half of businesses don’t use it, they’re missing out on an invaluable tool. Businesses that focus on their long-term planning find substantial opportunities for growth and are more resilient than those who only plan for the short-term.
In this guide, you’ll learn:
- The differences between growth and scaling
- The basics of both growth and scaling
- The history of strategic growth planning
- What benefits you can expect from it
- And what you need to make growth possible
Growth VS Scaling
One common misconception is that these two terms are the same. After all, both of them imply increasing a business’s financial gain. While they do have that in common, their ways of getting it differ. The truth is that your business will need a little of each to thrive. In order to make the wisest choices for your business, it’s essential to understand what each term means for your strategy.
What is growth?
The end goal of growth is to increase a company’s revenue. When most people talk about growth, they think in linear terms. It essentially means that growth would imply a steady increase in how a company uses its resources to increase its revenue. For example, hiring more sales representatives gets more clients and then increases revenue.
One important thing to note is that growth requires an upfront investment. Hiring more sales representatives costs money, bringing a period of brief financial loss before the coming gain. Growth is also not a constant, sustainable process. It wouldn’t make sense to continue hiring more sales representatives and onboarding new clients if there wasn’t an underlying plan.
As your company invests in its plans for growth, keep in mind that there will be alternating periods of investment and payoff, so the myth of a linear growth process will not become a reality. Remember that you must also prepare the other areas of your business to support these changes. Growth is temporary at best unless you have a solid foundation to keep it.
What is Scaling?
Scaling, like growth, has the end goal of increasing your company’s revenue. However, unlike growth, scaling does not imply linear expansion, nor does it mean a heavy financial investment preceding that return. Scaling focuses on what steps a business can take to increase revenue using its current resources.
Think of an email outreach campaign where the marketing team sends monthly emails to 500 people. Increasing the amount to 1,000 people would not require a significant investment, such as hiring an extra person or creating a new plan. Instead, the team can use the resources and plan that they currently have to generate more revenue with new clients from that campaign.
Now, if that business takes on a significant amount of new clients because of that gain, they will have to grow to accommodate the need. The team may require more account representatives or customer support personnel to handle the new demands. However, the resources will already be there when the team makes the investment. The initial investment needed to start is the most significant difference between growing a business and scaling a business.
The History of Strategic Growth and Scaling
Strategy itself is as old as humankind. Before business, strategic planning was used in politics and war, managing other aspects of human interactions. However, following the industrial revolution, manufacturing became a significant part of society. As new businesses popped up, newcomers noted the qualities that successful companies used and applied these to their operations.
The shift to modern strategic planning began in the 1950s with Peter Drucker, who introduced questions that helped businesses identify their role in the market in his 1954 book, The Practice of Management. He proposed that the customers, not the business owners, determined a business’s place and function as they are the driving force behind revenue.
Philip Selznick, a professor of sociology, introduced the concept of “distinctive competence” in 1957, which makes business owners think about what makes their business “distinct” from the competition and how that makes them more “competent” than the other options available to their customers.
This idea would eventually evolve into the SWOT analysis, which is a technique that outlines a business’s strengths and weaknesses in the context of the opportunities and threats they face in their market. Modern business advisors adopted the original concepts from manufacturing to the technology industry to maximize their results. Now, growth and scaling strategies exist to guide businesses in all sectors.
What Benefits Come from Proper Growth and Scaling?
Businesses that think long-term fare better than short-sighted counterparts. A temporary setback has less of an effect on a company that sees its significance in its future goals. A slight loss in revenue from a strategic change may only be a hiccup before a burst of growth. Those who persevere and understand their underlying purpose are bound to reach their goals.
When you invest in growing and scaling your business, you can expect the following benefits:
- Efficiency — A team that invests in a plan knows where their efforts pay off. Prioritized goals focus a team’s energy where it creates the most benefit. Efficient businesses see more success as a result.
- Consistency — Teams that use the well-documented processes grow larger, work faster and reach higher than those that don’t. Good strategies help you repeat success and avoid ineffective methods. Frequent updates improve how you perform tasks and keep your company working at its best.
- Preparedness — A business with a plan doesn’t have to scramble when its circumstances change. Companies that focus on growth invest in their strategies and plan for these kinds of obstacles. Not only do they know how to overcome them, but they know how to use them as an opportunity for future growth.
- Endurance — When a business constantly analyzes itself and its surroundings, it sees where changes are happening. This analysis allows teams to imagine where they want to be when change happens so they can come out ahead.
- Competitive Edge — With all of these assets, businesses built for growth stand out amongst the competition. Their hard work will only become more evident as changes test their strength.
What do You Need to Grow or Scale a Business?
Financial resources aren’t inherently necessary when scaling a business. Any business that is open and willing to change can find success in growth or scaling. More than tangible resources, like revenue or staff, there are certain principles that a business must have before successful changes take place. Here are the fundamentals of any growth and scaling efforts.
Well-Defined Market Identity
Your market identity does not exist in a vacuum. In fact, without a well-defined market identity that lives in the context of your industry, your business will be vulnerable to the factors affecting its environment.
What does your business do, what does it do differently than its competition, and how does that benefit you? Constantly revising and updating your stance is crucial. Pay close attention to customer behavior, changes amongst your competitors, and the overall financial climate. Like Kodak and Blackberry, many once-giants fell hard and never recovered when they missed signals that change was coming.
Targeted Growth Plan
Growing for the sake of growth will not bring your company sustainable success. Why do you want to grow? How will that help you serve your customers? When your business does something well and sees increased profits. As a result, it is tempting to repeat it and expect the same satisfaction. However, knowing your end goal will keep you on track for consistent success.
Consider a company that creates smartphone cases. If they have a high-performing model that sells well, they may consider diverting more resources towards producing that case. However, there is only so much demand in this area, and at a point, more expansion will not result in more revenue. However, if the company uses its success with smartphone cases to launch a tablet cover line, it can sustain its growth.
Small businesses and startups live for creativity. Their new ways of approaching old problems give them a competitive edge that many larger companies lack. For this reason, many smaller companies have yet to embrace good process documentation. This may seem like an unnecessary complication to a business that has done seemingly fine without it. However, that misconception holds them back from reaching new heights.
Well-documented processes allow a business to understand how they achieved success as well as failure. How will you repeat successes if you don’t know how you got there? More importantly, how do you prevent your team from making the same mistakes if no one is sure how they got there? A business process review can show you how your processes currently take place. Then, standard operating procedures let you put your flows on autopilot and save your creativity for where it’s really needed.
Who Are the Key Players?
Strategic growth will require input from your whole team. Though your C-Suite executives will be the guiding force, every employee should understand their role in your business’s development. The final decision of who performs what function in your company depends on which skills they possess. Here are a few examples of who can help with your growth and scaling.
- CEO — Your CEO has a high-level view of your company’s place within the market. Their input helps on a conceptual level, providing valuable feedback on past challenges, future predictions, and its current state.
- Senior Management — High-level managers offer a more granular view of how each part of your company will contribute to the primary goal. They have unique insight into the functions of each department and can draw from their specific expertise, adding detail to the plan.
- Business Advisors — An outside business advisor looks upon your company with a fresh perspective. This helps you pick up on details you may have missed. For example, they can provide insight into how your processes actually take place instead of how your team imagines they should happen.
- Fractional Chief Marketing Officer — If you work with a small team or want expert-level input, consider bringing in a fractional chief marketing officer for guidance. They get experience from working with various clients and can show you where you stand out in the market.
- Fractional Chief Operating Officer — Like a fractional CMO, a fractional COO comes in on a part-time basis to plan your growth and scaling strategy. Unlike a fractional CMO, however, a fractional COO focuses more on optimizing the processes and technology your team uses.
A well-directed investment in your company’s growth helps secure its future. Now, you have a working knowledge of what growth and scaling mean for your business, their history, benefits, and what you need to make it happen. With this information, you can take the following steps to solidify your business’s growth.
Remember, knowledge matters only when coupled with action. Don’t stop here. Keep up with your industry’s news, plan out your next steps, and keep moving forward. For more advice on strategic planning, see what skills consultants bring to the table.