What is scaling a business and why is it a trend among startups today?
The term “scaling a business” comes from the word scalability, which was first used in the field of computer science... it then became part of the jargon of start-ups looking to achieve hypergrowth.
So how exactly does one scale a business? What are the benefits of using this method? And what are the differences between scaling a business and growing a business?
Let's shed some light on the concept by focusing on its definition, the benefits of scaling a business, and 6 steps to get you started!
Scaling a business means preparing the future growth of a company. A scalable company is one that is able to sustain, both economically and operationally a strong growth. It must be able to deliver more, but at the same time achieve economies of scale, i.e. reduce the average production cost per unit of the product or service offered.
The goal of a startup is not to remain a small business but to grow in order to become a larger company.
It is, therefore, common to see some startups developing at a considerable speed. But in the face of this dazzling hypergrowth, some companies, who not do prepare enough in advance risk encountering structural and economic challenges in the long term.
Adopting a scalable business model means making sure that:
☑️ there is profitable growth, and therefore a significant competitive advantage. Indeed, a scalable startup can cope with hyper-growth without having to significantly increase spending on recruitment, material and IT resources, etc.
☑️ there are reliable investors, thanks to optimal profits.
Growing a business refers to increasing turnover as a result of being in business. This term is also used when a company adds more employees, increases its number of offices and the number of clients it serves.
However, the issue with growing a business is that it takes a considerable amount of resources to sustain constant growth.
Hence, the term scaling a business is used when a business increases its revenue without incurring significant costs. It will then be able to gain customers and revenue exponentially, while costs should only increase incrementally, if at all.
Automating processes is the first step in making a startup scalable.
For example, when developing an e-commerce website, it is important to choose the right marketplace or e-commerce platform. Indeed, the platform you choose must allow you to automate the customer journey as much as possible, from the first contact you make with them to delivery.
💡 Online business and scalability often go hand in hand. However, in order to scale your business, the marketplace model is recommended. If your number of customers increase, you will not have to make additional investments in logistics.
Many companies do not consider using a scalable business model when launching, and this can be seen with the types of products or services they offer.
Indeed, it is recommended to anticipate scalability as early as possible, by offering a product or service that is suitable for many types of users, with a low degree of customisation (even if the temptation to pamper the customer is great).
One start-up [...] did not take good care of its scalability during the design phase when more than a quarter of its turnover comes from the "customised" adaptations it has to make for its customers.
Source: Olivier Ezratty
Every company must use software to support its business.
If a start-up may be tempted to start with a cheap but fixed solution, it runs the risk of getting stuck as soon as its business grows.
Conversely, software that is too expensive causes a significant loss of revenue if the expected results are not achieved.
It is therefore recommended to use modular tools that can easily accommodate an increase in activity and adapt to the needs of your business (number of users, range of functionalities, etc.).
💡 Many software publishers have made the bet on modularity, in order to better meet the evolution and scalability ambitions of today's businesses.
One example is NetSuite, a cloud-based enterprise management software designed to help small and medium-sized businesses grow.
With this solution, you will be able to manage all of your key administrative operations and corporate financial processes on a single platform. Netsuite covers accounting, inventory management, supply chain management, and order management. Moreover, since it is a cloud-based solution, it can be accessed from anywhere at any time!
A scalable structure is also a structure that counts among its talents profiles, certainly graduates, but rather juniors.
And for good reason, young recruits are generally more inclined to adapt to change, especially when the company operates a pivot, i.e. a change in strategy to align its supply with demand and the various economic issues.
On the other hand, expert profiles, although they remain indispensable, have more difficulty adapting to major changes.
All in all, you have to mix talents!
Hypergrowth often goes hand in hand with an international outlook.
But to gain market share abroad quickly, it is important to anticipate.
This is why it is recommended to build a website in multiple languages from the outset, to avoid operating in a rush once international business opportunities arise.
Finally, IT scalability is one of the most important prerequisites when it comes to making a business scalable.
Scalable startups must have flexible tools from the outset to avoid creating complicated processes and data silos. However, it can be difficult to manage more and more software as your business grows.
With LastPass, you can save all of your passwords in a secure vault and offer a password-free experience for all employees, even if they are offline.
From protecting passwords to managing employee permissions, LastPass helps businesses of all sizes remove password obstacles and fix dangerous password behaviours. Moreover, the solution offers different plans that can be adapted to the size and needs of your business.
If you plan on scaling your business you must take the time to consider how you plan on adapting your business model in the future. Reacting in a hurry can lead to mistakes that are fatal to the growth of a company.
But let's not kid ourselves. While scalability may be dreamy on paper, many businesses cannot be scalable.
The best-known examples are service providers such as hairdressing salons. If the occupancy rate of a hairdressing salon drastically increases, the owner will have to hire staff accordingly, or even open new establishments! In this case, the model is not scalable.
This is why scalability mainly concerns start-ups, as searching for exponential growth is part of their DNA.