If you owned a corner grocery store before the invention of supermarkets you would probably have had a nice little business supporting you and your family.
Everyone would be working really hard in the store. You might pay yourself a minimum wage and the rest of the family might be working for “love”. You’d be open all hours including weekends. The ways to grow your business were limited to time, space and labour.
Everything was about personal service and growth was limited to what you could afford to stock, the space to stock it and the labour involved to serve the customers. There were tangible limits.
You would have been blown out of the water when the first supermarket opened up down the road!
They had a scalable system. They were bigger, brighter, had more variety, and operated on self-service and minimum staff at minimum wages. Then, they could afford to stock what you couldn’t and had a marketing budget to lure your customers away. They had systems and procedures for smooth running.
When you think about the difference between growing your business and scaling your business, it works like this…
Growing your business means you are adding more resources when you make more sales – you need more stock, more people, and more space. The increase in revenue is swallowed up by the increase in costs. It might look like you’re growing but technically you haven’t “scaled”.
Scaling your business means you’re adding revenue at an exponential rate without increasing your costs at the same rate. If it takes as much time energy and money to make the next sale as it did to make the previous sale, you haven’t scaled.
Think about Amazon:
They blew bookstores out of the water. Yes, you have to wait for the book if you want a hard copy, but you could get the book instantly at a fraction of the cost if you are happy to have an electronic copy – and at a fraction of the price.
They also thought about what people do when they buy books: people like to browse, read a few pages, have books recommended by the store owner, see reviews on the book jacket, and they like to take their time. Amazon noted all of this “buyer behaviour” and built it into their offering.
What can you learn from this?
- Growing your business happens incrementally. It suits some people but not others.
- Scaling a business can happen with a change in how you think – again not for everyone.
- Be alert for opportunities inside your business to scale rather than grow.
- The best businesses to scale are those that provide essential services that have a proven concept (people already buy) and they can be operated by fewer people and fewer overheads.
- Don’t scale a business that is a “fad” – it won’t last long enough to give you a return on your investment.
What do you think? Could your growing business be scaled?