[00:00:00] Emma: My client wanted to scale her service. It was a membership type service and so it was fairly easy to do. She got all the foundations set up correctly. She added as much value into the membership as she could. She showed up consistently and she put a marketing strategy in place that would enable her to scale.
[00:00:25] Contrary to popular opinion shared across social media, you do not have to scale just because everyone does it or is allegedly doing it doesn't mean you have to. Right? Right. Scaling and growing, they are often used in business interchangeably. Oh, I'm going to grow my business. I'm going to scale my business, et cetera, et cetera.
[00:00:49] they're a bit different for three different reasons. And I did a podcast episode on this a little while ago and you all loved it. So I want to just delve a bit deeper into this situation, right? So scaling, scaling focuses on increasing revenue without corresponding increase to resources. Yeah.
[00:01:08] So your resources don't actually need to change. The goal is to achieve
[00:01:12] more
[00:01:13] with
[00:01:13] less. So using existing resources more effectively or leveraging technology, , and processes to handle greater volume, which is why a membership is perfect, right? Growing generally means more staff.
[00:01:29] Or more offices or more stores or more products. More, more, more, more, more, depending on what the business is. And just because everyone talks about growing or scaling or making it more attractive for investors, when you decide to sell, you need to decide, is this actually the right thing for you?
[00:01:45] When I think about growing. I think about organic growth. When I think about scaling, I'm like, do I actually want that? And so you have to ask yourself those questions. I have people that come to me and want me to help them to scale, but they [00:02:00] don't have the foundations set up. They don't have the systems in place.
[00:02:03] They don't have the processes. And without all of that, it can be very difficult to scale. Well, Here's a breakdown of the key differences that I see between the two. First of all is resource allocation, right? In growing, we typically, uh, involved a proportional increase of resources, such as capital or workforce or operational capacity in some way, shape or form, along with an increase in revenue.
[00:02:27] So for example, you might want to double your revenue, but you might need to double your workforce or your production capacity or your marketing efforts in scaling. Scaling focuses on increasing revenue without corresponding increase to resources. So the goal is to achieve more with less always using the existing resources that they have more effectively leveraging technology and processes to handle the greater volume.
[00:02:53] Efficiency Sometimes growth can be less efficient because it often involves a linear expansion , of resources and costs. And the focus is on expansion, which might lead to higher operational costs and complexity. In scaling, the emphasis is always on
[00:03:11] efficiency
[00:03:11] and
[00:03:11] sustainability.
[00:03:13] It aims to increase revenue and customer base while minimizing all the costs. So when people talk about fixed cost, your cost base doesn't change if you're scaling, the cost base stays the same, which means you can scale, which means you can have greater revenue and greater profit by scaling that thing.
[00:03:34] And then the third thing is strategy and implementation , in growing, those strategies might include hiring more employees, opening new locations, increasing production, , or expanding product lines or service lines. It's more straightforward to increasing size and output of the business.
[00:03:52] In scaling, it requires strategic planning and innovation to handle increased demand without proportional increase in [00:04:00] costs. And I'm going to give you a couple of examples at the end of this of both of these things, right? Now we're talking about scaling and that might increase developing scalable business models, using technology to automate tasks, improving processes, and finding ways to deliver products or services to a larger audience without increasing expenses.
[00:04:19] It sounds lovely and it sounds like Nirvana, but I can tell you that a lot of work that goes into the scale side of things, right? And if you have a idea and you immediately want to scale, you've got to get all the processes right first, before you can think about that. I want to give you some examples of growth.
[00:04:39] So a restaurant opens new locations to serve more customers, doubles its revenue, but also doubles its cost for rent, its cost for staff and supplies. Yeah, that's growth. One of my clients is doing very well in allied health, in the allied health space, and she wants to grow to other parts of Australia.
[00:04:57] All well and good, but we need to make sure that the foundations are there and sorted and replicable when she's ready to go. And she can do that with ease, right? Two examples, two scaling examples. One that we can all wrap our heads around. A software company automates customer support with AI. How annoying is it?
[00:05:17] Just saying, unless it's really good, which allows it to serve more customers without hiring additional support staff, thereby significantly increasing revenue with minimal cost. Closer to home, you may have a service that you sell that is one on one. And in order to scale it, you move everyone into a group program.
[00:05:36] Or you create a membership so that you can scale that when you're ready. As you're sitting there, and thank you for joining me. You're awesome. As you're sitting there listening to this or watching this, what are your thoughts? Are you wanting to grow? ? Are you wanting to scale? And then my question would be, why?
[00:05:56] Why do you want to do either of those things? [00:06:00] Sometimes the simple questions are the best, right? I think. Understanding the differences between scaling and growing helps you work out what the right approach is, what resourcing you need, what marketing you need, what the conditions look like. Scaling is often seen as, , The unicorn, you know, a more sustainable way to achieve long-term growth or focusing on maximizing efficiency and leveraging technology and innovation.
[00:06:31] But there are a few other reasons why you would and wouldn't do it. So I've got kind of three reasons I wanna talk to you about. First, about scaling. So this is for you if you're thinking, yep, I've made a strategic decision, I wanna scale my business. Here are a couple of reasons why you would. It increases market demand.
[00:06:50] Obviously, when there's a growing demand for your product or your service, scaling your business allows you to meet that increased demand effectively. And by expanding your operations or your services or your business, you can serve more clients, enter new markets and enhance your market presence. What's not to love?
[00:07:08] It does not only helps in capturing a larger market share, but also positions you as a leading player in the industry. greater revenue and profit potential. So remember in our last episodes, we talk about revenue being the top line and profit being what we get to keep. We want that profit to keep.
[00:07:25] You can get both of those things in growing and you can get those things in scaling. Scaling can
[00:07:31] significantly boost
[00:07:32] your revenue and
[00:07:33] your profit margins because there's no extra costs, right? So by increasing your production capacity or expanding your service offerings can generate more sales and improve profitability.
[00:07:45] Economies of scale often come into play where there is a cost per unit and it decreases as production increases, leading to higher profit margins. And this financial growth can provide the resources needed for further expansion and further innovation. My third one [00:08:00] is competitive advantage. Scaling your business can give you a, an edge.
[00:08:04] In the market, can't it? We see lots of businesses, especially smaller businesses who are trying to scale to reach more audiences. They've almost, almost run out of time. And so they're forced to scale. Not such a bad problem to have just quietly. Uh, Larger businesses often have more resources to invest in the research and development phase, marketing and customer service, which can differentiate them from their competitors and, and larger businesses.
[00:08:33] can attract top talent, leverage better deals with suppliers and enjoy greater brand recognition. So all those factors kind of contribute to, yeah, let's do this. But I don't think that's the full picture. And I don't want you to go, Oh yeah, that sounds great. I'm going to scale. So I think there's probably three things that you might want to think about.
[00:08:57] As you think about scaling. One, risk of overextension. So scaling a business requires financial investment, extra resources, extra time, extra cash. If the business isn't ready, scaling can lead to overextension. It strains your finances, your processes, and your systems, and the workforce is broken. potentially drawn too thin and might dilute the quality of your product or your service.
[00:09:24] So the risk of growing too fast without a solid foundation can lead to a whole stack of things. Customer dissatisfaction, operational inefficiencies and business failure. And we see that all the time with people just trying to grow a bit too quick. The second one is maintaining quality and culture.
[00:09:43] As a business grows, maintaining the same level of quality and products or services can be really challenging. Unless you're a McDonald's, right, where it's like you've got the recipe. You make it exactly this way. Bang, bang, bang. But they've got their systems and their processes in place, yeah?
[00:09:57] And so, , you need to make sure [00:10:00] that the The company doesn't skimp on quality just because it's scaling. And also culture is really important. It's really important to small businesses and culture can be harder to preserve and rapid, uh, Growth can also lead to loss of personal touch with customers and employees.
[00:10:21] It's almost like you get promoted and then you don't get to speak to the people on the floor anymore. So there could be a disconnect from the values and the practices that you first put in place. So we have to work really hard on that. And then the third one is market. And economic uncertainty,
[00:10:37] I certainly have a lot of clients who know how that feels, but scaling a business often involves entering new markets or investing heavily in new product lines continuously, both of which carry risk, right? Can't do anything with risk. Now I'm a risk taker, so I'm kind of okay with that. I like to throw stuff at walls and see if it sticks.
[00:10:58] but economic downturns, changes in markets, trends, increased competition, they can all impact the success of scaling efforts. And in uncertain economic environments, the potential rewards just may not be worth it. So we have to have our business hat on when we're making these decisions. There's so much to think about when you think about those risks.
[00:11:22] And also the payoffs, right? Sometimes we go into business and our plan is to say yes to money and to grow. And that's okay. Sometimes we go into business and we want to create something that we know we want to scale. And that's also okay. Just go in with your eyes wide open. What do you think? Are you in scale mode or are you in grow mode?
[00:11:46] I would love you to drop it in the comments for us or send me a DM and let me know. Thanks for listening.
