Last editedApr 20232 min read
According to Harvard Business School research, over two-thirds of start-up businesses never deliver positive returns on investment. Two out of 10 new businesses fail within the first year alone. This gives some indication of why it’s so important to increase revenue rapidly through both growth and scaling.
The terms are often used interchangeably. But to maximize revenue, you must understand the difference between growth vs. scale in business. In this guide, we’ll discuss how the terms compare and give some tips to help your business increase its revenue.
What is the difference between growth vs. scaling?
Both business growth and scaling involve increasing revenue. The difference boils down to cost. While growth focuses on increasing revenue regardless of cost, scaling focuses on minimizing costs while increasing revenue. With scaling, businesses look at the larger profit margin rather than on revenue alone.
To grow, a business adds new resources and its revenue climbs accordingly. Expenses and revenue are linked. Scaling a business lets you increase revenue without spending money on additional resources.
What does scaling mean in business?
Scaling your business means you’re always focused on the bottom line. You want to increase your profit margins by growing revenue without spending more money. This often involves identifying and implementing strategies to add new customers through automation. For example, if you’ve set up an email marketing template, you can send your newsletter out to either one or 1000 sales leads at the same cost.
SaaS businesses spend money up front to build their solution. However, after launch they can continuously add customers without additional expenditure. This makes it a scalable business model. Revenue increases without expenses being directly tied to it.
What does growth mean in business?
Business growth also describes increased revenue, but it’s not always as sustainable as scaling. To sell and deliver more products and grow, you’ll need to spend more money on resources. There are many ways to adjust profit margins and grow consistently. Many business owners work more hours to meet increased demand or hire more people to consistently grow. Another option is to adjust the pricing model to keep pace with increased expenditure.
The growth meaning in business is tied to success; every start-up wants to grow with increased revenue. However, the problem is that it can be tricky to sustain this growth over time without burning through resources.
Growth vs. scale: which should you focus on?
Ideally, your business will be able to grow and scale, experiencing exponential growth with linear investment. Start-ups need to grow by increasing revenue and generate positive returns for investors. At the same time, scaling is important to keep costs low and improve your overall bottom line. You should think about your short and long-term goals to determine how to best grow and scale. Scaling a business means you’re able to grow more sustainably over the long term, weathering normal market fluctuations.
How to grow and scale your business
So, how can you minimize investment while accelerating growth? Here are a few tips to help you grow and scale your business efficiently.
Reduce production costs. Shop around for the best prices on parts and labor, while negotiating bulk shipping rates and cutting down on operational expenses.
Increase product value. Rather than spending money on new research and development, look for cost-effective ways to add value to your existing products and services. You’ll then be able to charge more for the new and improved product.
Audit your internal processes. Look for ways to become more efficient in the workplace, automating workflows using software. For example, GoCardless helps you streamline one-off and recurring payments using bank-to-bank solutions like direct debit.
Use a recurring payments model. You’ll be able to control cash flow better with predictable future income by offering subscription services. Consider adding a membership product with enhanced benefits for customers. GoCardless lets you take payments on the day they’re due, eliminating late payments and costly fees.
Outsource specialist tasks. Rather than spending money on full-time employees and expecting them to juggle multiple tasks, hire freelance specialists to provide expert advice where you need it.
By looking for ways to continually improve products and processes, you’ll be better placed to both grow and scale your business this year.
We can help
GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.