Is your business scalable?
Would your business continue to have a healthy profit margin if you were to expand exponentially? If so, your business should run almost on its own, without requiring your hands-on involvement in every aspect of its operations. But is your business scalable?
After some time at the start-up level, your business is probably running smoothly. With a proven business model and regular cash flow thanks to steady revenue, you might consider the next step. If you can answer yes to the following questions, your business may be designed for expansion:
- Can any team of employees be trained to deliver your products or services?
- Does your business offer a product or service that stands out above all others?
- Do your customers provide recurring revenue because they need to buy your product or service often?
By thinking ahead, you’ll prepare for risk and ensure your systems and processes are transferable or expandable. However, will you decide to scale out or up?
Scaling horizontally, or out, allows you to provide existing customers with a greater variety of products and services. In this case, you might increase your range of products. Scaling vertically, or up, lets you provide existing products and services to more customers. An example of this is to increase your number of points of sale.
Other things may expand along with your business – some of these elements may be out of your control. How will you handle the growth of the following areas?
- Your responsibilities
- The competition
- The decentralization of your power
- Existing problems
Any weaknesses, such as imperfect customer service or product delivery, will be multiplied as you grow. It is wise to improve them before attempting to expand.
Of course, scalability is not for all businesses. Your business may be too specialized for a larger market, or you may want to remain personally involved in all its aspects. After examining the pros and cons of exponential growth, you may decide that scaling up is not for you.