The failure rate of startups is startling. Some people estimate that only around 1% actually make it. Others are a bit more optimistic with a success rate of approximately 10% for startups in the United States.
While there are many factors that determine whether a business succeeds or fails, one of them is arguably whether leaders make the decision to scale and build the company accordingly.
Like many terms that achieve buzzworthy status, the word “scaling” is often thrown about. Many people mistakenly use it interchangeably with growth. Although the two terms are somewhat similar, there are significant differences between the two. Understanding those differences may very well be the key to unlocking success.
Growth: A Brief Definition
Growth is great. It’s one of those goals that all entrepreneurs strive for, and it’s certainly one of the necessary stages of business success. Growth is a somewhat linear concept. It's used to describe the revenue boost that comes with being an operational business. It's also a term that describes what happens when a business adds resources, which could include technology, capital, or people, and the company's revenue increases. It's like cause and effect. Growth often adds more work to the pile, with additional complexities and additional expenses.
Scaling: A Brief Definition
Unlike growth, scaling allows for expansion and the increase of revenue without a big uptick in expenses. While scaling a business, you're also growing and expanding. But unlike growth, you're able to balance rates and costs. Often, revenue grows faster than expenses increase and decreases your need to be as involved in the day-to-day. Instead of driving more stress and challenges, it helps boost the work-life balance and increase employee satisfaction.
Growth vs. Scaling
Do you know what the most successful businesses out there have in common? They build their companies with scaling in mind. It’s mission-critical to understand both and how they differ.
Trying to keep your organization growing constantly can take a large pool of resources, including both time and money. For example, consider a firm that currently has 10 clients. By taking on more clients, the firm can increase its revenue and grow. But at the same time, the workload increases, and new people have to be hired to keep up, increasing costs. That’s where focusing on growth just for the sake of growth falls short.
Scaling, however, uses growth strategies combined with a framework to make sure that the workload stays even-keeled while still helping drive increased revenues. Scaling is a process-driven approach and a decision to focus on growth that can be managed, not growth just for growth’s sake. Email marketing campaigns are a perfect example of scaling. The same email can be sent to two people or two million without much change in effort or expense.
Why Does the Difference Between Growth and Scaling Matter
Consider how startups often operate. They begin with one to five enthusiastic, motivated people and a shared goal: Product development and creating a business model. For many startup leaders, it begins with a big vision and ambitious goals. Many pull all-nighters, working weekends and pulling enthusiasm from the personal connections and motivation that comes with early growth. As the startup moves into the grow-up phase, it accumulates more employees and that enthusiasm starts waning for employees who are less connected to founders, which causes waning engagement and higher turnover rates.
And here’s where another major difference between growth and scaling really becomes apparent. There’s a distinct mindset and management style that scaling demands. It requires a balance between pushing employees with delegation and direction and empowering them with coaching and collaboration. This sparks creativity, commitment, and engagement among employees.
While growth requires more hands-on effort from founders. There’s nothing wrong with remaining a smaller business and doing the bulk of the work yourself. But if you want to increase revenue and work your way to industry domination, you need to make the choice to scale the business.
Tips for Scaling a Business
So, you’re ready to make the leap. Now what?
Make a commitment to scale: Scaling a business is a decision and not one that should be taken lightly. To make it work, you’ll need to create growth targets and action plans while shifting the leadership style.
Invest in company culture: Strong values and a thriving culture can reduce turnover and help you attract top-tier talent. Empower and engage employees to boost productivity, increase creativity and innovation, and drive success.
Build Scalable Processes Into the Business: When you’re ready to scale, wouldn’t it be easier and more efficient to do so if you’ve already got all the essential elements in place? The best time to start planning how to scale is before you're experiencing massive growth. Even better if you've got a strategy in place from day one of your launches.
Prioritize technology: We live in a digital age, and that makes it easier than ever to scale a business without laying out massive amounts of money. Consider automation for low-level tasks and systems integration for seamless communication and management.
If you’re ready to start scaling, it’s also time to take yourself out of the little, time-consuming tasks that you've been doing while getting your business off the ground. It's big picture time, and your efforts should start going toward ensuring you’ve got the right systems and processes in place to create sustainable growth.