Whether your company is a fresh startup or has reached enterprise status, you may have heard the buzzy terms “grow” and “scale” used interchangeably. Both of ‘em mean you’re probably making some headway and money, so they’re basically the same, right? While “growing” and “scaling” may seem synonymous, the two terms actually don’t mean the same thing.
When your business is growing, you’re increasing revenue, market share, and the size of your tem. On paper, this is every merchant’s dream, right? However, your expenses are also growing at the same rate—if not faster. In fact, businesses can fall into the trap of growing too fast and eventually land in the red on financial statements. In other words, you can be highly profitable but, basically, broke.
Scaling, in contrast, is an entirely different story than fast growth. When you’re scaling your business, your revenue is growing at a faster rate than your expenses. Typically, this will result in more cash and resources to help fund your business in the long-term. The key difference really between growing and scaling is that scaling is achieved by increasing revenue without incurring significant costs in the process. In a nutshell: One is sustainable, the other is not.
Now, let’s not jump the gun and conclude that growth is the wrong direction for ecommerce owners to take their business. There’s a time and a place when you should focus on growth and when you should focus on scaling. Let’s dig in to better understand the differences and the best course for your business.
What Does it Mean to Grow a Business, Anyways?
For any new ecommerce brand, growth is where you’ll begin. Growth refers to a steady increase in revenue from selling products or services. As ecommerce companies get more revenue, they ideally want to kick growth into high gear by increasing staff, inventory, or product offerings. Growth could also look like expansion into brick-and-mortar storefronts or global markets.
How does the typical merchant even start growing, though? Well, growth begins with a plan, and there are some things to consider if you’re new to the entrepreneurship or starting a store:
- Hire the right people for the roles you need filled.
When growing your store, make a list of roles you need filled in order of priority. If you’re a one-person operation and suddenly find yourself drowning in fulfillment duties—picking, packing, and shipping each order—hiring a person to help in that capacity should be your first hire. Remember, when growing, not every role needs to be a full-time hire, either. Part-time or seasonal help could be what you need for now to get you to the next stage of growth.
- Focus on established revenue sources instead of taking big risks.
Sinking every penny of your savings into a risky business move, like buying a fancy piece of machinery or buying too much inventory, could be the nail in the coffin. When your store starts making more sales and your bottom line gets a bit beefy, that’s not the time to spend it on a risk. Instead, keep fattening your revenue by putting earned money into proven revenue sources. Whether that’s a specific ad or event or promotion, stick with what works while you’re in growth mode.
- Build brand equity, recognition, and affinity in the marketplace.
Longevity for a brand is extremely challenging, if not impossible, if no one even knows your brand or what it sells. During your growth journey, take time to nail down a brand message, tone, voice, and mission in order to build the brand affinity that will take you far into the future.
- Identify risks, e.g., growing too fast, overextension, etc.
Pay attention to the numbers. For example, if your customer acquisition costs are well beyond where they should be, checking your data will help you see that troubling trend early so you can course correct before it’s too late and you’re outta cash.
- Create a competitive strategy for long-term success.
A major factor to growth is differentiation. You might notice market disruptors seem to come out of nowhere and become overnight sensations. Their growth is enormous, but what’s the key? Many high-growth companies simply stand out from the competition through products, features, or marketing that just does a better job highlighting what’s different. Brands like Gopuff, Robinhood, Stripe, and MVMT lean into clever messaging that sets them apart. Find what makes your store a competitor and shout that unique selling point (USP) from the rooftops.
It’s also important to understand that growth requires sustainability. For example, let’s say the owner of an ecommerce company has five employees. Once demand for the company’s products and services increases, the company’s owner hires five more employees in order to keep up with growth.
While the revenue stream is increasing for the company, so are the overhead costs. If those aren’t carefully balanced, the cost of having 10 employees can become unsustainable. There are times when growth can become almost dangerous, especially if the company doesn’t have scalable processes in place.
A common example used to highlight the dangers of focusing on growth is Wise Acre Frozen Treats. The company was founded in 2006 by Jim Picariello when he started making popsicles. In just two years, Picariello went from one employee to 13. He also purchased a 3,000-square-foot manufacturing facility. Despite the brand’s apparent success, Wise Acre’s growth became unsustainable, and the company eventually went bankrupt.
While growth is the initial goal of any new ecommerce company, scaling sustainably should always be in the peripheral.
Scaling is the next step for your store; be prepared
The difference between growing and scaling becomes more evident when a company has left the startup phase but it’s not quite yet a “big” company. It’s the awkward teen phase between level one and enterprise level. When an ecommerce company decides to shift to scaling mode, it should see its revenue go up and costs remain almost at a plateau.
How is this achieved? There are several ways ecommerce companies can scale while continuing to increase revenue, but it’s important to know that there is not a perfect one-size-fits-all approach; what works for one brand may not work for another.
Common ways that companies scale include outsourcing, utilizing cloud-based technologies, and switching the workforce to remote or hybrid models, which cuts down on overhead costs.
Believe it or not, it is possible for a business to scale too fast. For example, it may decide to consolidate some departments to help cut down on overhead costs even as revenue continues to increase. The remaining employees may become overworked and burnt out, which could cause the quality of your product or service to suffer. The last thing you want to do is jeopardize your brand’s equity simply because of an aggressive scaling process.
Coming up with a strategy for scaling well before your store has hit that stage is key, and there are a few simple ways to ensure you’re scaling sustainably:
1. Fine-tune and beef up your marketing strategy
You spent your growth journey honing your brand message, identity, and values. Now it’s time to create more comprehensive omnichannel marketing strategies around your brand. Start by going beyond an About page on your website and start thinking about how many touch points can be used to resonate with your specific audience.
And once you’ve scaled big? Think about fleshing out a complete in-house team or head to an ad agency to really maximize your marketing spend. The crux to scaling sustainably is earning long-term customer loyalty and retention. Loyalty is won when you stand out from competitors and provide an above-and-beyond experience that keeps your store as the go-to.
2. Consider automation to lighten the load
When you’re just starting to grow your store, packing orders, slipping handwritten notes into each package, and answering customer questions is manageable. Maybe your email list is small, and it’s not hard to see who and when to check in with about repurchasing. One-on-one contact and personalization fits perfectly into your day-to-day.
The similarity shared by those manual tasks you don’t mind at the beginning of your entrepreneurial journey is that they’re all incredibly time-consuming. Luckily, there are ecommerce tools at your disposal to help automate each part of your business as they become overbearing.
Email marketing tools like Klaviyo use the magic of automation to proactively communicate with customers along their shopping journeys. Platforms like ShipBob help DTC brands with logistics and fulfillment. And solutions like Route automate post-purchase strategies like package tracking, purchase protection, and claim resolution with world-class support.
3. Use your customers instead of advertisers to help bring awareness to your brand
Like we mentioned, advertising can be immensely helpful to spread brand awareness far and wide. However, word-of-mouth marketing is no strategy to sleep on. While it’s probably pretty weird to go to the neighborhood barbecue and start talking about your own cool products, it’s not weird to use what your customers are already saying about your brand and products.
Leverage customer reviews, social media comments and tweets recommending your goods, and more throughout your marketing strategy. Maximizing user-generated content has a huge impact with shoppers and is a fraction of the cost of traditional advertising.
4. Don’t lose sight of quality with product and experience
When you hit the big time, don’t start skipping steps that ensure high quality in your customer experience and your products. As you scale, find ways to maintain (or enhance) the quality your customers have come to know and love—and is probably the reason they keep coming back and made scaling possible.
One of the worst pivots a brand finally hitting its scaling stride can make is to go from a great product to a shoddy one. One notorious example of this is the mid century-inspired furniture company Joybird. At the beginning, it was a brand known for outstanding support and quality. However, as the brand hit broad discovery and accrued a massive fandom, it started skimping in order to keep up with demand. This has left a once-trusted company with a stack of 1-star reviews and a bad reputation.
Find the Balance Between Growth and Scaling
So, what’s the deal when it comes to growing vs. scaling your online store?
When ecommerce companies enter the marketplace, even if they have a product that scales well, they may not have implemented a sustainable process for scaling. The focus is often on intense growth and customer acquisition (as it should for any startup), but every company should create scalable processes to sustain business growth far into the future.
The end goal for any company is to make money, but keeping up with revenue growth without absorbing costs is a delicate balance. The best tactic is to start with a strategy for slow, sustainable growth, then shift into scaling mode once a sturdy team is in place and revenue is relatively predictable.