Discover what it means to scale a business and how to get started
As Tony says, “Business is a sport for gladiators,” but in this arena, there is one measure of success that stands above all others: growth. Even stock market giants like General Electric and ExxonMobil are under pressure to achieve growth – and not just any growth, but scalable growth.
Scalability becomes even more important for small businesses and startups, which are often operating in arenas so competitive, even gladiators might avoid them! In today’s fast-paced landscape, it’s more essential than ever to not only know the definition of “scale” for business, but to be able to apply it.
Before you even think about what scaling a business means, you also have to make sure that you have a product or service that will make your business talkably different from others and that you are filling a certain client or customer need. You have to continually add real value that creates raving fan customers. And you’ll need a solid business map and the determination to make your company a success.
Only then is it time to ask, “What does it mean to scale a business?” and learn how to use scaling techniques to achieve measured growth that can lead to expansion and recurring revenue.
What does “scale” mean in business?
In business, the definition of “scale” is to increase revenue at a faster rate than costs. Businesses achieve this in a number of ways, from adopting new technologies to finding “gaps” in their operations that can be streamlined. Businesses that are able to add revenue and increase operational demands while maintaining the same costs – or even lowering costs – are considered to be very scalable. Put another way, scalable companies are able to improve profit margins even as sales volume increases.
Think of it this way: You run a professional services company, and you just won a $100,000 contract. However, to fulfill that contract, you must hire two new employees at salaries of $50,000 each. You are adding to your revenue, but you’re breaking even in terms of profit margins – you’re growing, but you’re not scaling.
If you win the $100,000 contract, invest $5,000 in a new enterprise resource planning software, and therefore must only hire one employee at $50,000, you’re saving $45,000 – and you’re scaling efficiently.
Growth vs. scaling business definitions
These two terms are often confused: What does scaling a business mean versus growing a business? Although scaling a business is related to growing a business, growth and scaling are not synonyms. Growth refers to increasing revenue as a result of new business acquisition. Growth also refers to secondary occurrences that happen due to this acquisition: hiring more employees, expanding office or warehouse space and so on. Growth typically results in even losses and gains. Scaling, on the other hand, means finding ways to grow more efficiently, so that your gains outpace your losses.
By way of metaphor, think about the process of remodeling a restaurant that’s outgrown its space. The goals of the expansion would be to increase the restaurant’s square footage to accommodate more seating (growth) and create an efficient workspace (scaling). Without both in place, the staff won’t be able to provide flawless service that attracts and retains customers, which defeats the point of growth in the first place. Understanding what scaling a business means is similar. Without growth sustained by scaling, it’s ultimately your customers and bottom line that suffer.
Key metrics for scaling a business
Every business owner must eventually go beyond the basic business definition of “scale” and start digging into the numbers. As with everything else in business, scaling – and whether you are doing it successfully – is measurable. Here are a few metrics you can look at:
Customer acquisition cost (CAC):
The total cost, in labor and materials, of acquiring one customer. Businesses must find ways to lower CAC as they scale.
Lifetime customer value (LCV):
The predicted total value of a customer over their lifetime. Businesses should focus on increasing LCV as they scale.
Measure the growth rate of either revenue or customer base month over month. Set high goals during the scaling phase.
How many of your interested prospects are actually signing up for your service? It’s essential to get this number as high as possible.
Determining your business’ scalability
Now you know what it means to scale in business – but you’re still not sure how exactly it applies to your company. How scalable are you?
Businesses with less physical inventory and low operating overhead are more scalable because you won’t need to build infrastructure or even invest a lot more money in order to scale. This is why tech companies are able to grow so rapidly. But you don’t have to be a tech company to be able to scale like a pro. Anyone can use the latest technology to make scaling easier, like:
• Digital marketing strategies for customer acquisition
• Email and social media automation for lead nurture
• Chatbots to handle simple queries and requests
• Customer relationship management (CRM) systems to manage your customer database
• Enterprise resource planning (ERP) cloud software to streamline operations
• Warehouse and inventory management technology for saving time and labor
The business definition of scaling really centers on your strategy and mindset, which are much more important than your sales model, industry or current business phase. Scaling requires flexibility and problem-solving so you’re able to overcome any obstacle you encounter. To achieve explosive business growth, you must develop the mindset of a champion. This doesn’t mean achieving perfection – it means accepting failures as stepping stones to success. With an attitude of mindful scaling and a thorough understanding of best practices, you’ll be set up for business success.
Discover the keys to scaling your business for massive success
Tony Robbins’ complimentary Seven Forces content series uncovers the secrets to strategically scaling a business so it achieves your goals of long-lasting success. Get the support you need to make your business vision a reality.