Growing vs Scaling your business: What is the difference and how is it done?
What is the difference between growing and scaling a business?
Growing a company is the ability to add money to the turnover but to achieve this you have to scale all aspects of your operations, your team, your payroll, your marketing etc. Growing a business takes a lot of time and resources to scale to a large business regardless of what industry you are in, as you increase your client base you are always going to need to grow the infrastructure of the business.
Scaling a business is the art of increasing revenue without incurring significant costs. This can only be achieved once the core base of the business is created for example you have systems in place for all aspects of the business including all training plans for every position.
A significant number of business owners are able to see incredible growth in the first few years of business because they do not have enough data to benchmark themselves against for example because of their enthusiasm alone they may be able to generate £80,000, £150,000 or £250,000 in their first 12 months however once you have been trading for 4,5 or 6 years are you still able to grow at the same rate? We would expect to see the growth rate of any business start to plateau after 3 or 4 years. This is because the business now needs to start bringing on team members that the business owner no longer has sole control over, maybe there are now a few levels of management, or maybe they have opened another location.
Scaling your business is one of the hardest things to do, most businesses when they try to move from growing a business to scaling just add a larger area or more services. The real art of scaling a business is the ability to scale to multiple locations regardless of where the owner is located.
Fears of scaling a business
Many business owners stay small because they either do not know how to scale or are afraid to scale. Through all the businesses Bailey Dean has worked with we regularly hear the same issues being raised as to why business owners do not scale their businesses, they are -
Continuing to work in the day-to-day operations
Many business owners remain working in the day-to-day of the business rather than spending time working on the business. There are also many examples of business owners who have grown their businesses then chosen to go and work back on the ‘shop floor’ because this is why they started the business. However, it is important to make an understanding before choosing to scale of why you want to scale, it is a very personal decision and not one that others should influence you on.
Once the business reaches around 8–12 employee levels you need to be able to remove yourself as the business developing leaders ‘behind’ you. This means finding ways to delegate even the things you think only you can do in the business – or that no one else could do better.
Generating leads of sufficient quality
Generating leads is cited as one of the key challenges in scaling up. Having and executing a repeatable and reliable way of generating leads is a key requirement of a sustainable business. Before you start to scale your business you want to be in a position of buying customers, that is having the knowledge that for every X you spend you gain 1 customer. Once you are at this stage it becomes a task of refining to reduce X down to the smallest number possible.
A recent study by Marketo showed that companies with solid lead-generation systems achieved at least 133% more revenue than enterprises that didn’t have good techniques in place.
Having the right staff in place to support growth
Unless you have the right staff in place it is incredibly hard to grow or scale. The staff has always been a challenge for small and medium-sized businesses competing for talent with bigger names quite often a small business does not think that they can compete with a company paying a much higher salary so will leave the recruitment until they need someone urgently, it is always better to recruit someone late rather than wrong, however, if you do not recruit early enough you may not have that option
Getting staff to think, act and take responsibility
Small business owners often believe that they should be seen to be doing everything from the front however what you should be doing is giving control to your team so that they can become your next leaders however you cannot just pass on a job and then walk away you need to be in a position where the future leaders are trained and supported within the organisation before given the responsibility to lead the business and teams.
Keeping on track with the plan
We have all too often walked into a meeting with a new business and asked them the opening question of where they want to be in three years. We have heard all answers, I want to be turning over £100,000 to I want to sell my business for £10,000,000. Both are extremely achievable however what they both need is a detailed plan of action that has actionable steps to outline the investment and growth needed.
While there are many spreadsheet millionaires, this is the easy part, the hard part comes when you try to implement the plan to action which is why it needs to be reviewed and adjusted regularly as inevitably life gets in the way, sales do not stick, there is an economic downturn or any other unexpected situations.
Reviews give you the chance to get yourself back on track and ensure you and your business stay accountable, no plan should be set in stone though they should only ever be used as a guide, if you have a better-than-expected year they should be able to flex up as well as down.
How to scale any business
Scaling a business has been written about in several best-selling books and although they all set the principles out in a different way they all follow a similar method of delivery.
Know Your Purpose
Know why you got into the business, why your clients keep coming back to you, and why your employees want to work for you rather than a competitor. Have a clear outline of your company values and make sure these align with your own
Scaling a business will ultimately fail if you don’t first start with your “why” of going into business in the first place. Knowing your purpose and successfully communicating that to your team is the way to make them raving fans of your company and organically drive growth.
Develop a Business Map
Creating a business map which is different to a business plan forces you to ask foundational questions such as: What business are you really in? What was your reason for getting into this business in the first place?
Business maps encourage and challenge you to look at what is next for you and your business, where do you want your company to end up? Do you want to sell your business in the next five years or hold onto it for your entire life?
Perfecting your product or service
I often see business owners who want to scale their businesses too fast. Before you can scale your business you need to have your deliverables perfected. You need to be confident that you or any one of your team can deliver your product or service 99.9% of the time, on time with no challenges. It isn’t good enough to fix it as you go as the bigger you get the more challenging this becomes. You need to have this nailed down before a Bailey Dean Consultant considers having a scale conversation with you.
This stage is often not as difficult or as long as many new business owners think. From a new business starting this can often be achieved in around 12 - 18 months.
When you focus on creating a product or service that is of excellent quality, many of your growth issues will take care of themselves.
Create Processes and Operations Manuals
As you start to scale your business you will gain more customers and clients therefore you need a detailed structured operation manual to cover all aspects of the business. However, it is important to remember that as you scale not all your processes will for example, while small in one location the ordering process might be simple, order and deliver to a single location however as you scale this process might need to order from business units placed into a central location where it is all ordered from the supplier before being dispatched to the individual units then paid from another location.
Establishing a Solid Team
Developing a management team that is suitable to grow with the company is key when it comes to scaling the company. This may mean having to bring in someone who is overqualified or overpaid for the job they are currently doing but has the vision of what they want to achieve.
How systems drive growth
Systemisation is a buzzword that gets thrown around a lot in business, if you have been in business for more than 5 minutes then you will have heard at least one person claim you need to systemise your business to grow and develop however what a lot of businesses don’t understand is what is a system within a business context and how do systems drive growth.
A business system is a laid-out set of procedures to complete a specific task in your business. A system should be written so that any individual that works within your business or comes in eternally from your business can effectively run your business within a short amount of time.
These systems can be flow charts, checklists, longhand, videos, the list continues however the important part is that they must relay the correct information so that training isn’t required.
Having these correct systems in place frees up the business owners to develop the growth of the business. Michael Gerber explains it best in the E-myth. Gerber explains that there are three levels of business technician, manager and entrepreneur. The technician is the doer, this is who the systems are developed for. By creating these systems you can decrease your payroll as by systemising your business you will have a clearer picture of all the repetitive tasks that need to be accomplished. In the current technological period, you’ll have at least a few tasks that you have an individual doing that will just as easily be able to be outsourced to technology or as it is not a systemised task you’ll be able to get a remote worker doing the same task at a cheaper cost.
Most businesses are unable to grow because the owner is stuck in the manager position. The manager position is the one that runs the day-to-day of the business. The owner is often unable to get out of this position because they have a feeling that if they put another person in the business they will lose control. Systems give you the opposite of these. By creating the systems for the new manager to come in they then can run the business as you would, systems give the business order and structure, especially in decision-making.
Once you have the systems created you can step away from the day-to-day of the business and look at how to grow revenue or to expand to other geographic areas now you aren’t working in the business you’ll be able to sell the business to an investor level.
Systems aren’t just great for running the business because you have a framework of how the business runs you will be able to forecast much more effectively, therefore this will help you identify problems ahead of time and when they do occur you’ll have the ability to rectify them asap by leaning back onto your proven systems.
Using strategy to drive growth
Strategy and strategic thinking is a term often thrown around in business without understanding what it means. What is the difference between strategic growth vs growing?
By just growing you have many aspects to think about and look at including, accumulation of overhead and reduced quality of customer service and many companies will focus on the short-term gains of the growth.
This, coupled with the way the growth is organised through the employment of management structure and not looking at analytical data for decision making means that although you will be seeing growth how do you know you are growing in the right way, in the right direction or at the right speed?
We can identify all these challenges by using strategic growth.
Strategic growth is using previous data to drive our way forward in one of four key areas -
By looking at previous data you are able to identify the biggest areas for growth within your business and set out your growth strategy to expertly harness these areas.
However, what must also simultaneously happen is you must look internally within your business management and operational structure to identify any potential weaknesses that may become apparent within your growth.
Strategy growth helps us define our business in the long term by identifying what success looks like over the next, three, five, ten, twenty years or further by giving us a set roadmap to follow where we are able to set targets against what we achieve, identifying useful stopping points and potential setbacks along the way.
Business owners often discuss their business vision but not their strategy. The business vision is often the ‘We want to be the leaders in….’ but there is not considerable thought as to how they get there with most visions becoming a second thought if and when sales dip or the business starts to suffer when time becomes the most underutilised commodity when more good can be done from taking a short amount of time and planning your next move most businesses will become panicked and shoot straight for the action.
However, when Bailey Dean is called into a business that is lacking direction one of the first things we look to do is create a strategic growth plan by sitting down with the lead members of the team and creating those long-term goals.
By identifying the long-term goals within the client's eyes we are able to identify the financial and strategic goals that will help the company achieve these. We will also be able to identify any risk factors that may be affecting the business and correct these before they happen.
Creating a strategy is not complex however it does take time and it is also important that it is followed by being corrected and adjusted when the time comes.
Scaling a business often puts fear into small business owners, they believe that within a few years they will be at the helm of a behemoth, uncontrollable giant of a business that is whaling out of control beneath them however this is very rarely the case.
As daunting as it seems it is very often possible to grow a business within a few years to a place where it is easily scalable by following a proven system that highlights all the challenges that may become apparent along the way and deal with them before they become challenges.