Growth vs. Scaling - What's The Difference

Often times people use the terms scale and grow interchangeably in a business context. But there is a difference and growth must happen before you can scale your business.

Growth includes strategies that add revenue while also increasing cost incrementally - adding resources at the same rate as revenue. Whereas, scale adds significant numbers of clients/customers/users, increasing revenue without necessarily expanding costs - adding revenue at a rapid rate while only gradually adding resources. In other words, once a business is growing, or has grown, properly they should be able to scale and manage more business effectively and profitably. 

The initial growth phase is often referred to as start up. This is where a business proves a concept and starts growing infrastructure, people, and processes. To do this, it is imperative to first design and plan organizational structure in order to build a team appropriately so companies can remain profitable as they enter and navigate the infancy, then adolescence phases. A proper structure enables organizations to hire the right people at the right time, provide clarity, and create accountability. If companies hire too many people too early they lose margin, if they do not hire enough people at the right time they fail to fulfill product promises and lose newly acquired customers - high attrition makes it impossible to sustain growth. 

Early growth phases are often where the confusion between growth and scale causes many companies to fail before they ever gain any real traction. According to one StartUp Genome survey, 40% of failed startups can be attributed to premature scaling. This rate rockets to near 80% in failed tech based startups. 

In addition to not having the right structure, business fail when they scale before establishing and proving that their systems and processes are effective. Such as, inefficient order fulfillment or customer service processes that make it difficult to keep up with the spike in demand - which either results in shrinking margins or loss of customers. A business cannot scale if it has not provided a system in which to operate or processes for people to execute on. Without these key pieces there is no accountability or cohesion and quality of products and services will fall short of customers’ desires, let alone eat away at profits.

Systematization enables companies to continuously improve processes that allow them to remain lean while delivering the product promise across all functions. When combined with organizational structure design and planning, it enables effective talent development from attraction to retention too. Developing a proven way of doing business is essential for any company who wants to scale. Everything should be turnkey, or built to franchise (whether planning to franchise or not) before a business tries to scale. 

Finally, growth and scale require vision and strategic planning. Clearly developing an organizational structure requires first defining a vision, and the vision and structure supports the ability plan and operationalize strategies. Growth strategies are about improving competitive advantages, developing the brand, and proving concepts - including the ability to manage the business successfully. Once a business has do have done these things they are ready to scale because they know they can effectively manage rapid growth via proven systems and process, thus achieving their vision.

In short, grow your company by developing structure, systems and processes efficiently and profitably while proving concepts and increasing revenues. Then, leverage these proven ways of doing business to scale customers and revenue while maintaining or improving margins.