Scaling – why it is good for your business
There is a big difference between growing your business and scaling it.
Most traditional businesses grow, while some are designed to scale – which is why they can produce such explosive profit growth.
It’s why scaling can be the smart way to expand when times are tough.
So, what’s the difference between growing and scaling?
“Let’s take a typical service-based firm,” says business coach Pauline Bright.
“To grow it, you would have to employ more people; you’d need more desks, more computers, more office space. So, your extra costs usually swallow up any extra revenue.”
By contrast, a scaled business is able to grow revenue without the incremental jump in operating costs.
The most obvious and prolific examples of scaled businesses are software companies, which often tear through capital in the development phase but come into their own when a successful product hits market.
“They build it once, but they can sell it forever,” says Bright. “And if it’s online, and it’s self-service and downloadable, there are economies – you can even make money while you sleep.”
Scaling offers fascinating opportunities if owners think a little laterally about their businesses. While some say service-based businesses cannot be scaled, Bright disagrees.
“It’s a matter of looking at your industry and thinking, ‘What are the problems people are having?’ and, ‘Can I come up with a solution that would help with that?’.”
Often, Bright says, owners have scalable intellectual property under their noses. “Most people inside their business have some under-valued processes or unique ways of doing things and they haven’t seen it.”
If you can turn a technique or tool you use inside your business into a product – you have a scale-able idea.
Some multi-billion dollar scaled businesses began life as service-based consulting firms that realised their in-house tools could solve problems for others. US software firm Basecamp was originally a web design consultancy.
After losing track of too many client jobs, they developed an in-house project management tool which proved highly efficient – it actually became their main product.
More than 15,000,000 people around the world now us Basecamp’s project management applications.