Any business, whether it’s a startup or an established company, will eventually need to grow in order to remain competitive. But what does “growth” actually mean? And how do you finance it? Whether you should try to grow or scale depends on your specific circumstances, but whichever path you choose, it’s important to find the right lending partner.
There are two basic types of growth: business growth and scaling. Business growth refers to increasing the revenue of your existing business, while scaling is about increasing efficiency and replicating your business model in new markets.
Understanding the difference between sustainable growth and scaling can make it easier for business owners to seek out the appropriate type of financing–and use it effectively–as they pinpoint which areas of their business they need more resources.
A lack of suitable financing can be a major obstacle for businesses looking to expand their operations. Equity financing, for example, can dilute ownership stakes and reduce control over the company, not to mention the potential regulatory hurdles involved. Venture capital financing poses many of the same challenges–it can be difficult to obtain and may come with strings attached. The key to success is finding a lending partner who shares your vision for the business and who is willing to provide financing on convenient terms.
Growth vs. Scaling, Explained
Let’s start by defining growth and scaling.
A growth strategy involves using a variety of means to increase revenue. It’s the immediate stage after the business launch, as companies take on more clients or produce more products.
Scaling, while related to growth, is a sustainable business model that properly manages resources allocated to the business. It involves bringing the principal costs of the business down and increasing revenue through greater efficiency.
Exploring the Differences Between Scaling and Growth Strategies
The key difference between growth and scalability is the total revenue or resources generated by the step taken. Growth strategies mean businesses are adding resources to achieve a fixed revenue, which usually involves incurring significant costs. However, scalability means that once you’ve scaled the resource allocation, your profits can grow exponentially.
Scalability allows you to allocate resources in such a way that as your revenue increases, the expenses increase at a slower rate, whereas with a growth model, the revenue and expenses increase at the same rate. Scalability allows a business to experience rapid growth without the need to sacrifice resources.
Scaling companies use fewer resources to achieve a greater ROI. This can include automating certain tasks to reduce labor or redundancy or certain equipment that ensures a set cost of production no matter the demand from customers.
Risk management is easier when companies scale, as an owner can focus on the business’s critical tasks without compromising the revenue or resources necessary. And, because the assets and resources of the business are more closely managed, the growth companies can achieve is less limited.
Scaling Initiatives For a Successful Company
If you are starting a business, you may wish to frame it with scalability in mind before launching. A scalable business can generate revenue and profit faster than a business focused simply on straightforward growth.
Your business’s scaling strategy can include the following:
- Assessing the capacity for your business to scale, evaluating the capacity of your working hours and staff, your budget, and the accessibility of funding for your business goals.
- Create a realistic plan using quantifiable data about growth projections and an analysis of the potential for your business in your target market. Using good research and analysis allows you to pinpoint the best markets for customer acquisition.
- Create standardized work procedures and best practices for consistent production, including Best Practices routines and automation whenever possible.
- Focus on the personality of your business and brand, and ensure all marketing contributes to a consistent brand-building approach.
- Consider collaborating with partners or vendors that can help uplift your business or brand, trusted members of the business community that help cross-promote your business and gain more customers.
Final Thoughts – The Right Financing can Help Overcome Key Challenges
Any business owner knows, financing is often needed for growth, but it is almost always essential to scale a business. Without financing, it can be difficult to buy new inventory, hire additional staff, or expand into new markets.
Favorable financing can also be tricky to obtain, especially for small businesses. Traditional loans can be difficult to qualify for, and the application process can be time-consuming. Other methods, including equity financing or venture capital, each bring a variety of risks and challenges.
Fortunately, there are fixed financing solutions available from Merchant Growth that can help companies scale their businesses. Fast, convenient and flexible, financing from Merchant Growth does not require collateral and can be delivered in as little as 24 hours! Apply today!