This article was written by Monique Mills, Founder and Principal of TPM Focus
Let’s talk about scalability. As a startup and small business consultant, I hear a lot of great business ideas. A lot. I also hear a lot of great business ideas that will be more work than it’s worth because it’s a not scalable concept. When I use that term (scalable) with new entrepreneurs they are typically a little upset at first. My guess is because it may seem like an insult at first (?). Then we move on to them asking me to explain what scalable means as they’ve never heard the term before. I let them know that some ideas can be greatly improved from a business model “redesign”, however, some businesses just aren’t scalable. And that’s okay. Just know where you stand.
What is scalability?
Scalability is being able to maintain or increase your performance (i.e. profits, margins) even when faced with larger operational demands (increased sales). A truly scalable business can expand and increase their revenues all while minimizing increases in operational costs.
It’s a dream come true for most entrepreneurs (and investors!) once they find product-market fit. This is why software-as-a-service(SaaS) companies are so attractive. When you add more customers/users, there are minimal expenses to business in comparison to the revenues gained.
However, if you have a business that is not scalable, increased business can be a nightmare. For example, if you are a chiropractor, would you be able to increase the number of patients you adjust each day without adding another chiropractor to your staff? No. We all get 24 hours in a day and there are a certain number of patients you can physically treat in a day. Anything more would be unbearable. So, although an increased number of patients would enable you to potentially make more money, it’s not a scalable business model because you are limited in the number of patients you can actually serve without your costs exponentially increasing.
Pretty much anything that trades time for cash is non-scalable. However, you can add components of scalability to various aspects of a business by introducing automation. Automating repetitive tasks or interactions that don’t require your physical, real-time involvement is critical to business today and, even more so, in the future.
Pretty much anything that trades time for cash is non-scalable Click To TweetYou can add components of scalability to various aspects of a business by introducing automation Click To TweetAutomating repetitive tasks or interactions that don't require your physical, real-time involvement is critical to business today Click To Tweet
So, if someone tells you that your business isn’t scalable, it’s not shade against you or your business idea. It’s just a way to describe the context of your business strategy.
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