How to Determine Scalability in Business
Trapped in the daily grind of operating your business? Unable to see a way out? You might have a scaling problem. Strategic insights offer a way forward to this problem. It is part invention, part formula.
Scalability in Business: An Introduction
Businesses with less overhead like tech companies are notorious for scaling quickly and easily. However, for more traditional businesses, scaling can take some time and effort. Whether you’re following a plan or quickly adding headcount, infrastructure, and products to keep up with growth, it’s important to know that scaling looks a bit different for every industry. But there are some good practical tips to abide by when aiming to ramp up revenue to outpace business costs.
What is a Scalable Business?
A scalable business model is one that allows a business owner to take advantage of market opportunities without capsizing from a lack of infrastructure, out-of-control spending, or a sudden drop in demand. A scalable business is one that knows the risks of how it’s achieving growth. This can be tricky, especially as it's easy to get caught up in the excitement of growth and forget the long-term impact on the business itself.
The mark of a scalable business model is one that can accommodate for growth without a substantial investment of resources. Generally, an increase in demand warrants an increase in costs, and an increase in costs can trigger massive resources required to sustain this demand. However, scaling is about learning how to be strategic. Scaling your business is about learning how to grow with the least amount of effort. While scaling can and does require investing in certain aspects of the business like hiring or technology, the strategy is to onboard customers while keeping costs low. So a scalable business is one that does growth efficiently rather than broadly. Growth and replication then are two different goals.
When speaking of the goal to grow efficiently, that usually entails standardization and repeatable process. If scaling is done frantically, then it is not done well. This goes for onboarding new customers, product processes, manufacturing standards, HR practices, accounting, or virtually any other aspect of the business. If parts of your organization are running ahead or dragging behind, this will drastically impact the outcome of your scaling efforts.
Important Components in a Scaling Business Model
Establishing recurring revenue is a major way businesses can focus on their scaling. Determining which repeatable value-added services can be marketed is a big step in securing a steady influx of profit. Maybe your industry has a service model rather than a product model. In this case maybe to secure recurring revenue it’s time to switch to a subscription model. Ensuring the revenue pipeline is switched on is a major need for businesses looking to scale.
Each industry has its unique strengths. Whether you are selling a product or a service, there are unique challenges to scaling within those parameters. If you are in the service industry and more hires are required to meet am increased demand, scaling will present cost challenges. People are expensive to hire! The key is figuring out how to scale without creating the additional burden of overstaffing. Do you need more people in chairs or will an automated solution work to meet the demand? This is one way of resolving scaling pains at low cost. Product-based businesses, however, have their own hurdles to clear when it comes to scaling. In the case of product development, scaling can take time. Mistakes are sometimes more costly because the pipeline is more product heavy and it’s easy for a business owner to get swamped or have less room to pivot quickly.
How to Come Up with Scalable Business Ideas
Scalable business ideas largely depend on what industry you are in. If you are a larger company with a core offering, scaling might look like expanding to new locations or territories. Or maybe it’s not revenue related at all, but a desire to scale something qualitative, like good leadership within your organization. Finding a remedy to morale is a problem with a scalable solution.
Scaling in this instance might look like spreading vision among smaller team units until it reaches the entire organization. Scaling doesn’t always have to do with the monetary end result, though it often does. It could be a goal to raise up better leaders within your company or managers training younger employees on company ethos and vision. There isn’t really one perfect type of company to use as a model for scaling. All have hidden opportunities to unlock and unique sets of challenges. But no challenge means a company is unscalable. In some respects, how you invest in scaling should be strategic, but it isn’t an exact science. Even the best companies make mistakes, but the important part is to learn and apply that knowledge in a manner that keeps the company focused on its end goal.
An example of a scaling goal could be an expansion on your location or preparing your organization’s profitability to attract a prospective buyer. There are a lot of reasons to scale but most businesses want to make more money with less direct effort which is a great goal for every business owner to have.
Maximizing Scalability in Business with Coachwell
Something that business owners need to understand is this: while scalability means something different for every business owner, the basics are unchanging. Treating growth and scaling differently retains maximum impact for your strategy. Knowing your goal and what aspect of your business needs to scale is essential. Sometimes the right strategy to use when scaling is not immediately obvious. This is when it might be helpful to onboard a coach. A coach is primed with decades of experience recognizing patterns and roadblocks entrepreneurs are experiencing. Paying for this expertise may give you a key insight you need to unleash successful scaling in your sector.
Scaling is a growing pain in nearly every industry. The symptoms are usually out-of-control financials, staff frustrated by inconsistent standards, and a big opportunity in the market that feels like it’s slipping through the cracks from mismanagement. If that describes the situation you are currently in, get on the road to scale your business in a sane and manageable way with a coaching consultation.
