Why scalability is important in your business?

Whether you are an investor looking for prospective startup or you’re a maverick entrepreneur in search of a venture capitalist you might have already come across the term scalability of business. The concept behind a scalable business is that it can grow and expand exponentially, including into different geographic regions, with minimal input and incremental costs. If your business is scalable it means you are already keeping costs low as possible while ensuring production levels are optimal.

When a company can quickly “scale up,” it usually means it has the management, documented processes, information systems, and standard operating procedures to manage its own growth. Highly scalable businesses grow exponentially.

For instance take a look at the Google, which “has clearly demonstrated this scalability or exponential growth concept by adding customers at a quick pace while adding very few additional resources to service those customers,”.  Unlike any other business tech companies or software based business model is highly scalable. Initial investment behind development of the particular software is very high. But once it is ready to launch incremental costs decreases disproportionately with rapid expansion. That’s why google were able to increase their margin at a rapid rate in just a few short years.”

Or consider Facebook or Youtube, whose “initial costs for developing an advertising platform are very high, but once it is on the market, they can sign up millions of users with relatively minimal cost increases,” . But here is a point to be noted, tech companies have “low operating overhead and little to no burden of warehousing and inventory and don’t need a lot of resources or infrastructure to grow rapidly.” Not every business is designed for exponential scalability, nor every business can get away with low operating overhead. But no matter whichever business you’re in you can still improve your business scalability by making some key adjustments. First of all reduce redundancies. Review your business on regular basis and cut off all the unnecessary phase in the businesses model. Usually this happens in the

production phase. A business that is labor intensive or staff intensive is not scalable. Start looking at production automation, proven process technologies, and minimum staff approaches, before you begin scaling. In short automate to the max.

If you are in an industry of providing services, scalability here can be a little more tricky, but not impossible. Since services rely on the number of workers they use and the number of hours they work in the field, service-based business models tend to be more linear and hard to expand rapidly. But still the key for a service-based business is to find the processes that can be automated, or to find a value-added way to generate supplemental revenue without adding labor hours.

In the end keep in mind efficient and profitable business scalability is all about increasing output while keeping costs low.  Business model with high scalability will increase profits over the long term, increasing enterprise and brand value. Restructuring your business model to make it more scalable may give you the edge necessary to secure new customers and grow your business exponentially.

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