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Business Scaling

What is business scaling?

Business scaling occurs when revenue increases at a faster rate than the business takes on new costs. For example, a company may gain $50,000 in new revenue whilst only spending $5000 on marketing automation tools to increase the company’s visibility. The total revenue outpaced its losses, meaning that it has not only grown but has scaled. Scaling in business largely depends on two factors: capability and capacity. Is your business capable enough to grow, and does it have the capacity to accommodate growth? Scalability describes the ability of the business to grow without being hindered by the available resources when production increases. Furthermore, advancements in technology means that business scaling has become more convenient as it has made attaining customers and enlarging markets much easier.

What is the difference between growth and scaling?

The concepts of growth and scaling are often confused. Although scaling a business is related to growing a business, the two words are not interchangeable. Whilst growth simply refers to an increase in revenue, scaling refers to an increase in revenue without increasing the costs of production. Whilst growth typically results in even losses and gains, scaling a business means growing efficiently so that the gains outweigh the losses.

Why is business scaling important?

Whilst growing companies increase their volume sales, scalable companies are able to improve profit margins even as the sales volume increases. Growing without scaling can have negative consequences – ultimately the customers and bottom line will suffer. For example, a restaurant decides to remodel because it has outgrown its space. The goals of the expansion are to increase its square footage to have more seating (growth) as well as to create an efficient workspace (scaling). Without implementing both, the staff won’t be able to provide the top-quality service that attracts and retains their customers, which would defeat the point of growth in the first place. Some other positive consequences of business scaling include increased revenue, gaining a larger professional network and more visibility.

What are the negative consequences of business scaling?

The biggest con to scaling your business is the risk that it involves. Even if done so efficiently, expenses have to increase – so ensure to set a realistic budget that can handle the increased expenses. Business scaling can be costly, and it often takes time to see results from your efforts. Moreover, the systems used by smaller businesses are often not designed to support a larger business infrastructure, so scaling without sufficient infrastructure can create a future disaster.

Learn more about Business Scaling:

Scaling a Business

6 Steps to Scaling a Business

Growing vs Scaling

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