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.
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.
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.
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.