Though they’re often used interchangeably, scale and growth are two different things.
A business can grow in a number of ways: adding an employee or contractor to the team, a new client, or even moving into a new office space. Growth is usually linear and requires a reciprocal investment in company resources. Take a classic service business like a landscaping company. They might add three new clients over the course of a month, but those three clients might require a new part-time employee and additional hours from the company bookkeeper.
On the other hand, scaling refers to an exponential increase in revenue or clients that doesn’t put extreme stress on the business or require a significant increase in overhead. To continue our example above, let’s say the landscaping company developed a lawn consultation service that could be handled largely by a new software suite. In one month, the lawn consultation service was able to grow 700% – all the owner had to do was pay an extra $29.99 a month for an expanded license from the software.
This is a hypothetical example, but it still illustrates the differences between the two concepts. In this article, we’ll be discussing scaling: the elements of scaling successfully, why you need a tangible game plan before you start, and a few examples of how the most famous businesses you know were able to scale from their earliest days.
What factors are involved in successful scaling?
The specifics vary depending on the industry, company, and its offerings, but generally speaking, successful scaling always involves some mix of the below four elements:
- Capital: a business needs some kind of investment. Hollywood and television have popularized the idea of well-capitalized startups negotiating with big-time investors for seven- and eight-figure deals. While some businesses do receive large investments from venture firms, far more common is the investment of time made by the company’s founder and its first few employees. This is known as “sweat equity” and is a fine substitute for a cash investment, especially in the beginning stages of a startup.
- People: as a founder, you can do a lot on your own, but you can’t do everything. Even if you aren’t taking much personal time and are devoting a significant majority of your waking hours to scaling the business (which isn’t healthy or sustainable very long), you’ll eventually need some help. On the other hand, scaling doesn’t have to mean growing a massive team with a huge office. Many businesses can grow to six and seven figures with just a part-time contractor or two.
- Sales and marketing: even if you have an amazing product that everyone loves, you still have to get the word out in some way. When you’re focused on scaling, you need to emphasize quick-win marketing tactics that will allow you to reach a large audience – sometimes known as “growth hacking.”
- Processes: the best thing a company can do to improve its operations is to create tight, specific processes for every single thing the company does. Even if it’s something minor like creating an invoice or updating an internal record, creating a process will help ensure it can eventually be outsourced to someone else. This is a key element of scaling.
Making a plan for scaling
Now you know the elements of scaling successfully, but how do you actually go about doing it?
Like any significant achievement, you need a good plan. Here are the steps:
1. Identify your goals
“Scaling” is different for everyone. Do you want to become a global conglomerate with eight or nine figures in annual revenue and hundreds of employees? Or do you just want to get to the point where you don’t have to handle all the day-to-day responsibilities on your own? Decide on a few overarching goals that you want to reach as you scale. It doesn’t need to be extensive – just a few sentences on what success looks like to you. Try to be as specific as possible, but you don’t need to be exact yet.
2. Set your numbers
Now is the time when you do want to get specific. Decide on goals for important metrics like revenue, growth rate, churn, and customer acquisition cost. There are lots of different schools of thought on metrics – TechCrunch, for example, says that the four vital signs of a SaaS business are revenue growth, sales efficiency, revenue churn, and cash burn.
3. Know when to use a personal touch
You have to do everything possible to evangelize your startup, especially in the early days. Digital marketing is important, but don’t forget about your personal network and capabilities. Some founders may recoil at the idea of doing these kinds of manual tasks, but as Paul Graham of Y Combinator famously recommended: in the beginning, you have to do things that don’t scale. Graham compares this concept to a car with a hand-cranked engine: once the engine is on, the car can run on its own, but it takes manual effort to get to that point. The same thing is true for your startup.
4. Continue improving the product or service
Even if your startup is scaling successfully, you can’t afford to keep your offering stagnant. What works for your product or service now might not work in a month. You have to be constantly thinking of ways to iterate on what you’re selling to make it even better. This is much easier said than done, of course, but the better you can anticipate what customers will need from you in the future, the less friction you’ll run into while scaling.The better you can anticipate what customers will need from you in the future, the less friction you’ll run into while scaling. Click To Tweet
Successful stories of scaling
Now you have the framework for scaling your startup and can begin the process of researching to form your plan. But it’s always helpful to hear success stories of those that
When you think of disruptive startup unicorns, Airbnb seems like a textbook example. But its origins are much more humble: in 2007, founders Brian Chesky and Joe Gebbia needed money to pay the rent on their San Francisco apartment. They got the idea to rent out air mattresses to conference attendees. The first few years of Airbnb weren’t glamorous – in 2008 the founders famously had to sell boxes of customized political cereal to raise money. But thanks to a strong focus on their customers and the ability to pivot, Airbnb went on to dominate the travel industry. In 2020, the company IPOed with a valuation of over $100 billion. (Source).
You probably don’t think of McDonald’s when you consider startups and scaling, but scaling is exactly what mixer salesman Ray Kroc did in 1954 when he discovered two brothers in California using strict cooking processes to sell a high volume of food with consistent quality. Kroc convinced the brothers to let him license the idea. In 1955, Kroc opened 3 McDonald’s restaurants in Illinois. Just six years later, McDonald’s had 228 locations and was doing $37 million in annual sales. (Source)
Today it’s the ubiquitous workplace chat tool, but did you know that Slack actually began as a video game called Glitch? What we know as Slack today was supposed to be an in-game communication system, allowing players to collaborate. Unfortunately, Glitch wasn’t a success – but founder Stewart Butterfield and his team were able to scale Slack to over 12 million daily users. (Source)
Scale your business your way
Scaling your startup is a conscious choice. It’s not the easiest task, but it can provide rewards beyond your wildest dreams if you do it correctly. The key is to decide what scaling means to you, create a plan to achieve it, and then iterate on it. Maybe you only want to scale up to have a few outside contractors handle the day-to-day business workload, and that’s okay! You’ll be much more motivated to pursue a plan to scale when it’s something you’re really passionate about.
And if you’re looking to learn more about how a fractional CMO can help you scale, fill out this form to schedule an introductory call with our team.