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One can often hear people talking about scalability of a business and investors’ willingness to put their money in startups that show a potential for it. But what exactly is a scalable business?

In short, a scalable business is the one that can multiply its revenues with minimal incremental increase in costs. Take a mobile app, for example – most costs are associated with its development, after it is finished any number of copies can be created at little to no expense.

So, how does one go about organizing a scalable business?

1. Maximum Automation

A scalable business by definition cannot require a massive amount of labor. If in order to grow you have to drastically increase the number of staff, it is not a scalable business. Which means that you should start looking for the ways to automate the entire process from the get go, before you even start considering actual scaling. Constantly be on the lookout for methods to supplement the work processes with software and decreasing the number of personnel. Yes, software may incur upfront costs, sometimes rather impressive, but it will save resources in the long run and increase scalability.

2. Outsourcing

If you want to build your company’s presence in different countries or cities, there is a wide range of tasks you can outsource to agencies. The first step is to separate tasks you can delegate to one global agency and tasks that are to be done locally (for example, event management, logistics, facilities etc). According to Luckyposting.com, it’s a good idea to outsource all you marketing activities to one global agency, as it will be best aware of your marketing advantages, competitors and challenging. But unfortunately it is obvious that you need different local agencies for a range of other tasks.

3. Franchising

You may use initial stages of building up your business as a demonstration of your product viability, after which it may be worthwhile to investigate the possibilities for franchising. After you have the proof that your business model works, franchising may allow you to scale faster and more effectively than by trying to do everything by yourself.

4. Licensing

Similarly, licensing your business process to already existing players in other markets may be a better choice than trying to take them head-on. If your startup is your only source of income, it is especially important consideration, because you may simply lack resources to enter another market and do battle with companies that have already established a foothold there.

5. Attract Investor Money

Unlike businesses aimed at growth, which start with low expenses and low incomes that grow more or less hand in hand, scalable businesses often require high upfront expenses and, in case of good planning and quality idea, can increase their incomes exponentially with minimal additional costs. Which means that you are most likely to need money from investors, and in order to do it, you will have to first validate your business model by means of MVP (minimum viable product). Show that your idea really is working, that it can attract paying customer and be scaled, and investors will come.

6. Making Yourself Redundant

Ideally, a scalable business is a business that works and develops without your direct participation. It doesn’t mean that everything should be automated (it is impossible). It means that you should make it your goal to stop working in your business while freeing up your time and resources to working on it. Which means finding and hiring a small, tightly knit team of professionals, trimming the fat by removing redundant processes, outsourcing everything but core activities and so on.

As an endnote it would be appropriate to mention that not all business ideas are scalable. Service and consulting industries, for example, can hardly be defined as scalable, because they are very hard to automate. The same goes for innumerable small businesses scattered across the Internet – one may think that a company that operates exclusively via the web has everything it needs to be scalable, but very often something stands in the way – perhaps the market isn’t large enough, perhaps its owner simply doesn’t want it.

So, if you aim at building a scalable business model, you should very carefully consider the area in which you are going to work.


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About the author 


I’m Donny. I can sum myself up with four simple ways. Online Entrepreneur. Author. Investor. World Traveler

  1. Attract and relish investor funding. Organic growth (reinvesting profits only) will not allow you to build the “hockey stick” growth curve desired by premium buyers at exit, or financial analysts positioning you for public stock sale. You will give up some control with investors, but their expertise and experience is usually more than worth the cost.

  2. Automate to the max. A startup that is labor intensive and staff intensive is not scalable. Start early looking at production automation, proven process technologies, and minimum staff approaches, before you begin scaling. Document processes and build online training videos so new people can come online quickly and consistently.

  3. Focus on marketing and indirect channels to get the message out quickly. Direct marketing is generally not scalable, especially on low-cost high-volume products. These days, heavy marketing is always required to make your startup visible and scalable amid the flood of information from all sources to all customers. Word-of-mouth does not scale.

  4. Outsource what is non-strategic to optimize leverage. Smart entrepreneurs never outsource their core competency, and never rely on intellectual property they don’t own. They also don’t try to do everything in-house, since growing all the expertise you need is slow and expensive. Scaling requires leveraging outside resources.

  5. Use a minimum viable product (MVP) to validate the model. No product, even with a large opportunity, is ready to scale until you can show it working, with multiple customers paying the full price, to validate the business model. Count on multiple pivots with real customers, before you get it right, before you ask for investor money to scale.

  6. Build a strong team to take yourself out of the critical path. If you are still spending most of your time working “in” your business, rather than “on” your business, then you are not yet ready to scale. Show that you have and can continue to hire the right people to run the scaled business without you being everywhere and making every decision.

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