What Is Scaling?
Updated: Oct 17, 2022
Today I welcome a guest who is helping our communities scale their businesses.
What is scaling, why is it important, and why should an entrepreneur care?
Scaling a business means setting the stage to enable and support growth in the company. It means having the ability to grow without being hampered. It requires planning, some funding, and the right systems, staff, processes, technology, and partners.
Scaling growth is about creating business models and designing your organization in a way that easily scales in order to generate consistent revenue growth and avoid stall points without adding a ton of extra cost and/or resources along the way.
Before I go forward I do need to make a note of the difference between growth and scaling. In business we think of growth in linear terms: a company adds new resources (capital, people, or technology), and its revenue increases as a result, according to Spend Journal.
By contrast, scaling is when revenue increases without a substantial increase in resources. Business growth takes a lot of resource to sustain constant growth – like the old saying goes, entrepreneurs needs to have money to make money.
According to the recent CFO Connect Summit, financial growth can only be achieved while making larger losses. Scaling, on the other hand, is achieved by increasing revenue without increasing costs significantly.
The importance of scalability is vast: it helps entrepreneurs enter new markets, it can help
entrepreneurs establish multiple domestic and international entities, and can grow entrepreneurs’ profits without taking on too much additional business costs.
According to Maddyness, scalability includes scaling all facets of the business, such as:
Hiring and employee contracts
Team communication
Management strategies
Project management
Client relations
Marketing efforts
Automated tasks
Ongoing training
Internal processes
Expenses and payroll management
Product development
Manufacturing and distribution
So we know scaling is important, but how is it done? Here are Scalto’s 5 keys to help you grow the business:
First, the entrepreneur should know their potential customers: what are they doing? What are they like? How do they seek information?
According to Scalto, people receive about 1,000 brand messages from text messages, WhatsApp messages, online ads and street advertising. The company’s task is to grab the attention of the potential customers in a saturated landscape.
The entrepreneur should focus on what the consumer wants: understand the specific need the customer has. The entrepreneur may want to create a website to create an online sales channel.
However, according to Horacio Genolet, CEO of Ogilvy Latin America, Global Brand Manager of Coca Cola and member of Ogilvy’s global Enterprise Leadership Team, this may generate 3% of the entrepreneur’s sales, but if the entrepreneur develops a different and innovative product, sales may increase by 50%.
Read more about Horacio on Scalto.com blog page.
Build the brand: A strong brand with credibility and values is like a spotlight that makes the business shine brighter and invites the customer to say: “I want that brand”.
According to Scalto, consumers value brands, regardless of low costs. Mass product companies know this and continue to invest in their brand: identify the value offer, add a differentiator, dedicate time to it, aim to build a strong brand, evolve services.
Work in a more integrated way: due to the complexity of marketing today, according to Scalto, the entrepreneur must work in an integrated way with different partners; they can be technology, data, process issues, or creative collaborators.
Lastly, creativity cannot be automated, per Scalto: creativity is the entrepreneur’s differentiator. It is the added value the entrepreneur can bring to the company. The entrepreneur cannot buy it from an agency. It is unique, and it is part of the entrepreneur themselves.
I use to say I am like a sponge: I love absorbing information, but Gabriela Pulida, founder of Scalto, has taught me I need to treat myself and my business more like a plant.
“Growing a business takes time, similar to a plant, it needs attention and dedication in order to thrive. With the right tools, advice and support you can make customers prefer your brand.”
And that is why the entrepreneur should care. Scaling at the right time has many benefits, but premature scaling can happen when the business expands faster than the business is ready for. Over- hiring and rapid market expansions are common examples of premature scaling.
The entrepreneurs should be thoughtful about growth strategy.
Scale at a pace the is right for you and the business, and if you do not know how to scale, give Gabriela a call over at Scalto.