Business Scaling vs Business Growth: All The Little Details

 

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How about we share a personal story of yours? 

Once upon a time, your business was a few months old and you were as enthusiastic as ever about it. You put in the work and that natural drive to build your own thing (product or service) led you on nonstop. Then came your first traffic, customer, or partnership - a blithering sign that you truly exist and your stars are aligning. 

Your pulse raced as your eyes watered and a good dose of dopamine rushed through you. At this point, the world seemed to stop - even your wall clock that ticks so loud - and all you could think of was how to grow your business. There's no way you'd let this good feeling slide, especially since more of it means that your business and finances are thriving! 

The end. 

The moral of that short story is that you used the word "growth" when you may have been thinking about "scaling". Trivial? Perhaps so - until you realise how the little details change everything about these two business terms.  

Growth in Business


Take the icon above for an example. When a business - visualised as the young plant - adds on a third leaf, then it can be said to have grown. Growing happens all through the time when the plant gets its fourth, fifth, and one-thousandth leaf - or root or branch. 

Business growth, therefore, simply refers to an addition of resources. Think of anything you want - employees,  computers, manufacturing machines, grand new office buildings. If as much as one person comes on board the team or one little new desktop computer is purchased, your business has recorded growth.   

Scaling in Business 


Scaling is an all-out "money-must-be-made" phase in business. At this point, the young plant (in our example above) has grown into an adult tree. It is now at its peak - and it is more focused on bearing fruits. 

The tree does not increase in size or in the number of its branches or roots (meaning that the growth phase has ended). Instead, it keeps producing more and more output in terms of fruits and flowers.   

Scaling in business refers to the process of actively increasing business output or revenue while minimizing costs and, basically, using no extra resources. 

It means that for a business to be described as scaling, these three things must happen. 

First, the system must be using its available resources - and nothing more. Secondly, the system must be running on minimized costs. Thirdly, the system must achieve a significant increase in revenue or income. 


What Comes First: Growing or Scaling Up a Business?

You might ask yourself what typically comes first, whether growth or scaling. The answer is growth. 

Long story short, scaling is a highly complex process. It requires not just proper planning but precise execution. By implication, you will need to grow your business first before moving on to scale up.

The growth process will see you acquire ample resources, a strong team of highly skilled employees, as well as sufficient funds, knowledge, and practice. Growth could start from the first day of launch but you can hardly tell how long it will span - whether several months or years. During this period, you should refer to elements like customer feedback, present market data, and industry or business as they serve as indicators of your readiness to scale or not. 

Many entrepreneurs make the mistake of underestimating the time it takes to scale. That should not be you - not if you value your business's existence. 


Did You Know? Only 34% of businesses opened in March 2013 remained open in 2023, according to the U.S Bureau of Labor Statistics (BLU)


Metrics Associated With Business Scaling

Revenue

How much revenue is been generated and how big could the figures go? 

Profit Margin

After calculating revenue and taking out cost, what percentage of the initial revenue amount is left? This indicates the profit made. It could be from a specific activity such as digital advertisements or from the business in general. 

Customer Acquisition Costs

CAC or Customer Acquisition Costs points to the amount you spend in acquiring a customer that pays for your products or services. This important metric signifies the percentage of your business cost that is doing quality work.  It is the very opposite of CPA, which stands for Cost Per Acquisition and indicates the expense of acquiring a non-paying customer. 

Customer Lifetime Value

Are your customers the one-off type or are they loyal and high value? The Customer Lifetime Value metric bears the answers. 

Generally, you want customers who stick, make multiple purchases, and pay high. They may wear huge gold necklaces but that doesn't mean they come on a platter of gold. It will take dedication, unmatched business strategy, and perhaps, a sprinkle of luck to get this type of customer.  

Churn Rate

The churn rate metric represents the number of your customers whom your competitors have snatched or won over. Another way to think of it is as the number of customers who have stopped patronizing your business. 

Customers are always on the lookout for impeccable services, low prices, or warm and welcoming customer relations. Some may turn out to be in search of just one of these while others want two or more. 

Whatever their reasons for leaving, you should know that your business churn rate is only as high as your refusal to step up your game and address the bottleneck in your services.  

Retention Rate 

Are you a keeper or not? Anyways, the retention rate indicates how many of your customers have stayed over a period of time. 

The retention rate is a stark opposite of the churn rate. Therefore, resolving the problem in the former automatically settles that of the latter, and vice versa. 

Net Promoter Score

The Net Promoter Score indicates the loyalty of customers towards your brand. The one single way in which this assessment is made is by questioning their tendency to recommend the brand. If customers can recommend you to a friend or family, it means your business is doing well. However, if they recommend you to a total stranger, you're definitely blowing them off with impeccable service. 

Conclusion

Ready to take your business growth to the next level and eventually prepare for scaling? We bet you are! And we're rooting for you all the way. 

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