E-commerce sellers often talk about expanding their business. They want to turn it into a successful entity that can make them a lot of money and bring them high levels of success. Before they can do that though, they probably need to decide if they want to grow their business or if they want to scale their business.
Growth and scale are common terms that get thrown around a lot in the e-commerce world. However, there are actually some key differences between the two, and knowing which one you are aiming for can make a big difference as to whether you succeed or fail in your business development plans.
If you’re unsure of whether you need to grow or scale your business, there are some key things to keep in mind that can make it a bit easier to understand what it is you need to do.
What Does it Mean to Grow a Business?
Business growth is a term relating to the overall size of your business. This could be referring to the number of sales it generates, the number of employees, the number of buildings, or the number of products it sells. No matter the actual increase, the whole point of business growth is to positively impact your revenue.
One of the most important things to understand about business growth is that it usually takes a lot of resources in order to achieve it. Let’s say, for example, that an e-commerce business owner wants to grow their business by opening another office and warehouse to increase their marketing and inventory capabilities. While this growth will certainly help in generating more revenue in the long-term, the business owner will likely have to spend money to hire new staff for the new buildings, not to mention the cost of the new buildings themselves.
Business growth tends to be what many businesses (particularly the big ones) get solely judged on. However, it might not be the best way for you to judge the success of your business. Spending money and using up your valuable (and limited) resources to try and grow too soon can be hugely detrimental to the future of your business.
Growth is good, but it isn’t always the right way to expand your business.
What Does it Mean to Scale a Business?
There are now a lot of business owners that have become obsessed with the idea of scaling. You’d probably be forgiven for thinking that business growth and business scaling are the same things, as the terms seem to be used interchangeably by many business owners. This is not the case though.
Scaling your business means increasing your revenue without spending money to do so. This sounds like an impossible situation but many businesses have been scaling very successfully. Let’s think back to our e-commerce business owner earlier who was going to grow their business by opening a new office and warehouse. If they wanted to scale their business, rather than grow it, they could look at their email marketing strategy as a starting point. If rather than sending 100 emails a month, they increased this to 500 emails a month, this could easily result in an increase in revenue but the business owner hasn’t actually used up any more resources than they would’ve done in the first place.
Even things like switching to a more automated marketing or e-commerce platform could be a way of scaling your business. For newer businesses that don’t have a huge amount of money and resources to throw around, scaling could be the best way of expanding your business.
How to Grow a Business
There are 4 commonly used growth strategies for growing your business, they are market penetration, product development, market expansion, and diversification.
Market penetration tends to be a good starting point when it comes to growing a business. It involves increasing the market share your business owns in your current field. No new products or services are offered using market penetration, instead, you use your current offerings to increase your market share by changing your prices to be highly competitive, or by increasing your marketing efforts to help bring in new customers (ideally, from your competitors).
The product development growth strategy involves creating new products or services that your current niche will appreciate. An example of this would be an e-commerce business that sells lamps to start selling bulbs, lampshades, and other lamp accessories. The same market will be interested in the products, but the new additions to the catalog can bring in a lot of new revenue.
Market development is where you move the focus of your business into new markets. This can be as simple as opening a store in a new city or beginning to offer international shipping as well as domestic. While your products and services stay the same, the area your business operates in changes. With an e-commerce business, this can be a fairly inexpensive form of growth as the main increase in cost will come from shipping to new areas. However, additional costs could be incurred through additional packing requirements, increased marketing efforts, and covering the increase in inventory your business will need to cover the uptake in demand.
Diversification is the ultimate form of business growth as it involves a completely new focus for your business. It doesn’t mean you stop what you’re currently doing and effectively start a new business, it means that your current business carries on functioning as it is, but you launch a new product or a new service in a completely different market to the one you currently operate in. For example, an e-commerce business specializing in baby products might decide to launch a product aimed at pets. Diversification is a risky strategy but it can be a very successful way of growing your business. It usually requires a lot of resources and a huge amount of risk management.
How to Scale a Business
Scaling a business can be easier for some companies than for others. For example, technology companies can usually scale quicker and easier than companies that sell non-technological products as they can make a small change to their technology, and have almost a completely new offering. That being said, all businesses can scale if they have the right knowledge, resources, time, and effort required.
One way you could scale your business is to think about partnerships with other businesses. This is a way of increasing the impact your business has on the market it’s in as well as increasing revenue through the combined efforts of two companies working together. If there is a business in your niche that you think could make a great partner, it might be worth reaching out to them. A lot of the time, partnering on a specific project or strategy costs very little but it can bring in some big results.
Automating some processes can also go a long way in scaling your business. Let’s say you’re sending all customer emails manually – this can take up a lot of time. If you switch to a platform that can automate a lot of emails (order confirmations, shipping confirmations, marketing emails, etc), then you will have more time available to focus on other aspects of your business. This can be the type of scaling that leads to big increases in revenue as your time is being put to more effective use instead of spending most of your working day sending emails to customers.
Scaling your business can be done by using free marketing to promote your products or services. Social media is a prime example of this. While the social media platforms do offer paid-for advertising, simply posting high-quality, relevant, and engaging content on your social media profiles can actually help scale your business. Social media can be used as a marketing tool that can gradually increase your audience and customer base over time as more and more people find your posts. As social media is free to use, using it to scale your business makes complete sense.
If you’re in the process of setting up your business or if you’re thinking about the next project your business is going to undertake, then it might be a good idea to give a bit of thought to how it might impact scaling in the future. Scaling your business is done gradually but can have some lasting effects on your success long-term.
Mistakes to Avoid
Whether you’re trying to grow your business or scale your business, there are some things you might want to keep in mind as they could have a detrimental impact on your expansion efforts.
If you grow or scale your business too fast, you could face some issues that could very likely cause your expansion plans (and potentially your whole business) to fail. Imagine you designed and ran a hugely successful social media marketing campaign that drove thousands of potential customers to your website. Unless your servers, platform, and software can handle this, it might not be as successful as you think. Expanding too quickly can also cause issues with inventory. If you have limited inventory but your business begins to receive a big increase in orders, you might find yourself in a position where you have no stock, no deliveries planned, and a lot of unhappy customers.
Keep Your Business Mission and Culture in Mind
When growing or scaling your business, it can be easy to get distracted by results. If you are solely focused on increasing your business revenue, you might lose sight of the reason you started your business in the first place. When you launched your business, you likely would’ve had a mission in mind. You would’ve also likely thought about the type of culture you want to create within your business. It’s very important to not do anything that goes against this. That being said, there may come a time when the culture and the mission of your business have to change to meet the needs of the niche you’re in. However, staying true to your initial values is always a good idea.
The same thing can be said if you’re looking to add new products, new services, or new markets to your business. It’s normally a good idea to take a bit of time to consider how any new idea, project, service, or goal will impact the overall perception and reputation of your business. If something you do confuses, angers, or frustrates your customers, you could very well lose current customers instead of gaining new ones. A common mistake when growing or scaling your business is getting distracted by results rather than keeping a close eye on your current business status.
Should You Grow or Scale Your Business?
In quite a few situations, the decision as to whether to grow or scale your business will be made for you by the resources you currently have available. For example, a new business might not have the financial resources to develop new products or to open a new warehouse or store. An established business that has been running for a while might be in a position to do just that though. That doesn’t mean that established businesses shouldn’t focus on scaling too, it just means that growing their business might be a better choice.
If an established business owner doesn’t want to grow, they can still take advantage of the benefits scaling their business can bring. It can be a bit harder to scale an established business as you would think that most of the processes used are pretty efficient. Scaling an established business will probably put more of a focus on marketing through social media, emails, and referrals.
Ultimately, as a business owner, you’ll be in the best position to understand what is best for your business. Whether you choose to try and grow your business or scale your business, as long as you plan and prepare effectively, an increase in revenue is a real possibility.
