Building a Scalable Business
No sane investor will invest in business that doesn’t have growth potential. No matter how interesting or genius your business idea is, if it’s not scalable, it can’t fly. This post will teach you everything you need to know about building a scalable business.
What does Building a Scalable Business mean?
A scalable business is one in which increasing revenues is less expensive than maintaining current revenues. In other words, the costs of expansion are significantly surpassed by the revenues generated. To understand how it works, you must first comprehend the qualities of a scalable business.
A scalable firm can service an infinite number of people without incurring an infinite amount of running expenditures. Scalable enterprises include things like digital courses and blogs. Highly scalable digital businesses are those that can develop revenues almost independently of the CEO.
Most investors will only invest in businesses that are scalable. In building a scalable business, it usually takes time to move from idea stage to a proper business and then to scale the business.
Most people who start small businesses don’t intend for them to remain small indefinitely. Even if becoming a big business isn’t your objective, you’re probably expecting for increased earnings and clients once you open your doors. Consider scalable company ideas, or business ideas that may become extremely profitable as they develop, if you’re searching for a firm with strong growth potential.
How long does it take for a business to be scalable
Based on research and understanding, when building a scalable business it takes approximately 5 years to develop a viable business. This is probably why more than 90% of start-ups fail. Not because the idea wasn’t good, but because the people involved were unable to get through the teething stage of the business.
Don’t get me wrong. Some businesses take less time, especially businesses that are based on already established fundamentals, but innovative businesses always take about 5 years to get acceptance. Some longer. like the famous Indomie noodles took almost 10 years to become accepted and profitable.
Since we are going to be talking about building a scalable business, we are going to bring our minds to see where we want our business to be in future and then start early to plan towards that.
Now let’s assume your business is now profitable and you have customers willing to pay for your goods or services. And as your business continues to grow you find out that it is becoming more difficult to keep track of all clients and ensuring you satisfy every customer.
It is probably time to scale your business.
But what does that really mean?
And how do you know if you are doing this in your own business?
Scaling your business
The term “scaling your business” is used frequently in business but it can have different meanings depending on the context it is being used in.
When a business can scale their operations, this means that they are able to handle a growing amount of work or sales in a capable, cost-effective manner.
We will look at what it means to scale your business and the difference between growth and scaling your business.
We will also look at different ways companies can scale their operations to continue to be competitive in the marketplace.
Case Study – Scalable Business Ideas
Imagine that you own a restaurant and sell probably 30 meals per day. A new customer tries out your food and decides to use you for a wedding that will include 1000 guests. You take the job and increased your revenue by signing that customer but now you don’t have the resources available to fully serve them. So you hire new employees to help your business manage the workload more effectively.
Yes, your business may be growing, but it isn’t scaling.
Although you grew your revenue when you signed on a new client you also increase your expenses at the same rate.
The reality is, if every sale you make requires the same amount of time and effort as the previous sale then your business model is not scalable. I know this will surprising and now you are thinking “is my business or idea scalable? ”
If you check online now, you will see that there are more investments in tech companies. The reason is that most have potential for exponential growth and are invariably scalable. Take for instance I come up with an idea to design a software that outperforms android and iOS combined. Once developed, replicating the software costs almost zero since most people will only need to download it.
This is a scalable business because increasing sales does not increase cost. Profits can become exponential. Your business scales when it can cope with an increased amount of work while maintaining or increasing its efficiency.
Predictors of Scalable businesses
When it comes to building a scalable business, here are some great predictors of success:
- Predictable revenue
- Subscription-based services
- Having diverse income streams
- High customer retention rates
- Creating a value ladder of products to offer for your customers
The people at the idea stage will benefit more from this post because they will plan to scale from the very beginning.
If a company increases their revenue but increases their costs at the same rate, then that business is not scaling.
But how can you focus on quickly scaling your business while still building a strong organization?
Types of Scalable businesses
A typical and apparent example of a scalable business is software. Additional copies are released at a considerably cheaper cost once the product is complete.
E-commerce entails the sale of any goods or service through the internet. With just a Skype camera and microphone, you may give information, seminars, and various types of consultancy services to a large number of individuals.
Similar to the preceding bullet, replicated products. Online retailers are becoming competitive with shopping malls. Scaling opportunities include expanding delivery locations and diversifying product offerings.
Facebook, Twitter, and Instagram are examples of social media. Any new venue for exchanging photographs and impressions appears to be well received. Periscope (a global video-sharing platform) and The League (a dating app for the “elite”) were both launched in 2015.
The scalability of downloads – music, books, games, and apps — is comparable to that of software. The app may be downloaded hundreds of times each day once it is published.
The majority of line commodities manufacturing operations are automated, as is franchising. Although the net cost is cheap, quality should always be considered. Client loyalty is formed when you never let them down. When a customer visits McDonald’s, he wants a Big Mac that is nearly identical to the one he got the prior time. Ray Kroc established a guideline for every burger that included weight, sauce quantity, and fat percentage. This is building a scalable business. In the next chapter we would discuss how to make your business scalable