If there is a huge demand for your product or service, then you can create a business out of it. But can you scale your business? Some businesses are scalable, meaning they can grow income exponentially. Others are not open to growth, but they generate a reliable income which is not lucrative.
Here’s how to know if your business is scalable:
1. Operating Leverage
Businesses that scale have operating leverages. If your business’s operating costs go up at the same rate as your revenue grows, then your business is not scalable. But, if additional revenues need moderately small additions to operating costs, congratulations – your business is scalable!
2. Your Business Is Scalable If It Can Handle a Sudden Increase
Most service-based companies depend on talented employees and customized solutions, which makes it hard for them to handle a sudden increase in new sales or customers. These businesses can’t handle an increase in demand, so they aren’t easily scalable.
For a technology company, its core product can serve millions of customers because you just need to increase bandwidth and hardware to handle an increased load. This company is scalable as it can deal with a sudden influx in clients.
3. It’s Positioned in a Large Market
If your company is positioned in a large market and it can take market share from others, then it’s scalable. However, if there isn’t a huge demand for your core product, then it means that your company can’t scale even though you have a systematic process of producing the product.
4. Is Your Business Systematized to Run without You?
One reason most small businesses are not scalable is because most can’t operate without the owner. So, the business isn’t scalable because the business owner isn’t scalable. If your company needs you and your effort, it’s not scalable. It’s an incorporated career.
For a business to be scalable, it should be able to operate without the owner. This is good for you because you get more time to work on big projects or start new projects.
5. Can Your Business Produce a Consistent and Predictable Result for Clients?
There’s nothing wrong with running a service-based company. The only problem is that it’s difficult for the business to scale because you need a customized solution for each client. A customized solution can’t offer a predictable and consistent result as it’s not repeatable. So, for your business to scale you need to learn to take what you do and produce a process which can be applied repeatedly to offer a consistent and predictable result to different clients.