When considering starting a new business as an entrepreneur or as a small business owner, scalability is arguably one of the most important factors to take into account. In this situation, it is important for you to know how to grow your business. Starting with a business model or structure that allows for easy scalability is key. Successful business growth is dependent upon a business model that increases profits regularly over time by expanding revenue without tacking on additional costs or increasing current costs.
What a Scalable Business Looks Like
Ultimately, a scalable business possesses the potential to multiply revenue with negligible increases to cost through easy expansion. Your small business is prepared to scale up if you have a bona fide product and a successfully-tested business model that is ready to expand to new markets. A company that produces software products is a prime example of a scalable business. For example, considerable financing must be funnelled into the production of the first copy of the software. However, once the software is produced, an unlimited amount of additional copies can be reproduced quickly for negligible incremental costs.
Asking Scalability Questions
There are several important questions to consider when developing a business model that will allow for scalability, keeping in mind the ‘low-cost, high-profit’ goal baseline. Looking ahead to scaling up your business requires planning and careful thought. Questions to consider in developing a scalable business model include the additional input necessary to increase the business’ output, to what extent company sales can be expanded without the need to hire additional employees, and how easily adaptable your company’s existing products are for the creation of additional, future products.
Building a Strong Team
If you continue to spend the majority of your time working “in” instead of “on” your business, you arent ready to scale. It is vital to build a core team that can run your scaled business without your constant presence and input on every decision. That being said, it is usually not cost effective or scalable for most small businesses to do everything in-house, no matter how great your core team is. Utilize your companys core competencies and expertise, but remember that leveraging outside resources is also a good strategy.
Early consideration of production automation and cost-effective staffing approaches enables you to scale up your business more easily in the future. Production automation through the use of cost-efficient machinery can reduce total staffing needs. As well, new employees can be quickly and effectively trained using standardized training materials.
Scalability Helps to Attract Investors
One of the best ways for a small business to attract investors is to start with a scalable idea. Investors are partial to business models that that are based on market research, as well as business ideas that they can easily envision as scalable into market expansion and increased revenues. Your companys business plan can benefit from reflecting scalability. A scalable business typically has margins over 50 percent, a minimal amount of staff and requires a low amount of support.