Growth vs scaling: What's the difference and why does it matter?

by Faustine Rohr-Lacoste | June 14, 2018

Looking at the international business landscape today, it’s hard to ignore the fact that some companies have grown incredibly large in a relatively short amount of time. As it turns out, this phenomenon has two different terms that might seem interchangeable — growth vs scaling.

You might be thinking to yourself that both words sound awfully similar, and we get where you’re coming from. Let’s take a look at their dictionary definitions:
 
Grow — become larger or greater over a period of time
 
Scaling — represent in proportional dimensions; reduce or increase in size according to a common scale
 
It’s easy to mistake them for being two different ways to talk about something that’s becoming larger, but there’s a key difference:

Scale-growthSo what does this mean in the context of modern businesses? In this article we’ll analyse both words, point out their subtle differences in meaning, and explain why one of them is more relevant when you’re trying to build a company.

What is company growth?

Generally seen as the definition of a successful company, growth refers to increasing revenue as a result of being in business. It can also refer to other aspects of the enterprise that are growing, like its number of employees, the amount of offices and how many clients it serves — these things are almost always linked to growth of revenue.
 
The biggest problem, however, is that it takes a lot of resources to sustain constant growth.
 
Take for example an advertising agency that currently has five clients, but which is about to take on five more clients. Increasing the number of companies it sells to will bring in more money, but chances are it won’t be able to get the work done without hiring more people.
 
Because of this, financial growth can only be achieved while making larger losses, too.
 
Companies that offer professional services, like the advertising agency above, will always have to deal with this problem. Taking on more clients leads to hiring more people to support them — while it increases revenue by adding clients, it has to increase costs at the same time.
 

It can also trouble other kinds of businesses, however — especially those that didn’t do the math on their business plan. If you haven’t figured out exactly how you can increase the amount of money you’re making without it making a comparable impact on your costs, chances are you’ll become subject to stagnated growth.

What is scaling?

As we’ve learned, traditional growth is riddled with problems. Instead, it’s much more interesting for companies to focus on scaling — a way to grow without being held back by increasing costs.
Screenshot 2018-06-13 15.09.09
The key difference with growth is that scale is achieved by increasing revenue without incurring significant costs. While adding customers and revenue exponentially, costs should only increase incrementally, if at all. A great example of a company that’s successfully figured out how to scale is Google, which in recent years has been adding customers (either paying business clients or ad-supported free users), while being able to keep costs at a minimum. As of 2017 it had seven products with over a billion active users each, while only employing about 88,000 people.
 
google-businesses-billion-users
 
The difference between growth and scaling becomes most clear when a company isn’t a startup anymore, but is not a large corporation yet, either. At this critical stage the business will have to decide between growing at a regular rate or switching over to efficient scaling of the business. If it wants a shot at making a lasting impact on the industry and perhaps even society as a whole, it has to be done without accumulating a high amount of overhead.
 
Unfortunately there’s no clear-cut path to successful scaling — if there was, it would be much less impressive to build a million-dollar company. There are a couple of things to keep in mind, however.
 
First off, it’s important to focus on increasing the value of your product — not the price. This way you’re creating something that keeps validating its price point — a fact that can effectively be used in marketing the product to new customers.
 

It’s also important to realise that your business won’t just become successful based on sheer size alone. There are competitors out there, and they’re working just as hard to scale — that’s why you’ll need to stay competitive. Staying in the race is all about being smart in the way you do business, creating a place where your employees love to work and implementing the latest technologies to supercharge the workings of your company.

How Spendesk can be instrumental in scaling your company

One way to stay ahead of your competitors is by using Spendesk, the all-in-one expense management platform. Using our powerful features like our virtual and physical prepaid credit cards, we offer an effective way for your employees to spend less time on accounting and more on being productive.
 

Let’s rethink the way your employees pay for what they need — get started by booking a free demo today.

best-management-software 

TOPICS : Fintech

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