When it comes to running a business, few ideas as are as critical as growth and scaling up.
For the most part, the two words are used interchangeably even though they actually mean different things.
Let us take for example. You own a boutique. After a few years of running your single stall boutique, you figure that you have enough money to open another boutique and so, you do so. Now depending on how you proceed from here, you will either be growing or scaling up.
Below then, we look at the difference between Growth and Scaling when speaking about businesses.
When your business grows, there is an increase in revenue and an increase in market share. However, your expenses also grow with you and eat into a substantial chunk of your revenue. In this instance, the cost of setting up the new boutique eats into your revenue. Also eating into it will be overhead costs of the new store, paying your new staff, etc. You will do this until the new boutique can exist independently, which could take months or even years.
Growing a business, as many often find out, is actually more stressful and sucks a lot of money from the business. This is why, a business might be successful as a single store, but when the owner attempts to open a new store, the business dies within a few short years. This is because growth sucks out your revenue with little corresponding increase in income. However, scaling up doesn’t –
Scaling in business often refers to the situation where the revenue earned grows at a much faster rate than your expenses. It is often a lot harder to achieve than growth because it would need a string of strategic decisions at critical points in the business to make it grow at about 2x the industrial rate while other expenses remain the same.
In the case of your boutique, scaling would mean that you open your new boutique but rather than start from scratch with it, you have enough cash to hire a proper team to manage it right away, hire staff permanently for it and invest in all the resources your first shop has. You do this in the knowledge that you have enough funds to remain afloat and are also adding customers already since your new boutique is running as the fully independent entity it is.
Scaling is much harder, which is why very few startups get to this stage. However, once your business has scaled, it has a great chance to then witness exponential growth and become a major player in the industry.
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