Growing Your Business vs. Scaling Your Business.
There is a significant distinction between growing your business and scaling your business to the next level of success.
When your business is growing, you are adding resources and costs at the same rate that you’re adding revenue. In this model, you gain more customers, then you hire more people and manage more cost and complexity to service more customers. While technically speaking your business has “grown,” it has not scaled. On the other hand, scaling is about adding revenue at an exponential rate while adding costs at an incremental rate.
Not all businesses will scale the same way.
Consultants (like me) and professional service firms have a difficult time scaling their business because they are tied to the delivery of a service. The only way to grow is add more clients then hire more people to deliver the service.
But it is not impossible to scale these types of businesses. The key to scaling will require a different business model.
In order to find scalable aspects in your business model, locate the aspects of your business that can be replicated quickly and cost effectively. If your next sale requires just as much time and effort as the one prior to it, then your business model is not really scalable.
In my case, I can deliver a full-day strategy workshop to dozens of people in the same time as delivering it to one client. There's no additional cost or complexity associated with delivery for one client team or a room full of individuals.
It is a simple move to the very scalable “one-to-many” business model.
Companies that create software products, entertainment, media and publishing are all great examples of a scalable business. Once the costly upfront investment in the research and product development stage is complete, the software can sell as many copies as it wants as fast as it needs to with very little incremental cost. This is scalability in its purest form.
Think about how Expedia.com changed the entire travel industry. Before Expedia, travelers had to choose between handling their own travel plans or use a travel agent. It was slow and inefficient process because an agent could only service one customer at a time.
Expedia moved the entire reservation process from inefficient agents to the Internet – where the human element was eliminated altogether. With this innovation, Expedia could serve one customer just as easily as they could service one million at the same time. This innovation transformed an industry in the process.
When a business can automate the delivery process of goods or services they are easily scalable – especially if they also eliminate the costs of the delivery. How are your products or services delivered? How can you automate them? Once you determine that, you’ve found a scalable model.
However, figuring out the mechanics of scale will not be enough to scale your business.
The cart before the horse.
For many early stage CEOs getting to the $1 million level and beyond is a primary objective. There are two sides of the coin I call the “scalability factor” – one side is demand, the other is delivery. Scaling demand significantly reduces the amount of time it takes for a little company to become a bigger company.
To reach the million dollar revenue level first requires a foundational strategy to be the “one and only” choice of higher value customers and keep them beyond the reach of competitors.
Instead, most early growth entrepreneurs focus on the delivery side–operational systems, processes and cost, hoping to build a well-oiled machine that is self-managing and does not require an increase in cost and complexity to produce exponentially more profit.
This puts the cart before the horse. Operational systems and processes are of little value to a business that has yet to create impact and earn influence with higher value customers who represent a bigger future.
Impact and influence in the marketplace is the foundation that must first be in place to scale your business to the next level. If you can’t innovate ways to bring new value to the marketplace that will truly matter to people, it won’t matter how efficient you are on the delivery/cost side of things.