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Published 03/03/2020
Scalability is a term we often hear in business but what does it really mean? You wouldn’t be wrong for saying ‘growth’ but it encompasses a whole lot more. Flexibility, agility, versatility – all the things that equip your business for expansion but also prepare them for unforeseen changes that can and have blown many a business off course.
Here we look at the importance of scaling your business and provide useful tips on how to do this the right way.
Scaling your business is about more than just growth. You can grow your business but that doesn’t necessarily mean you are able to handle the increased output. In fact, your growth can have a detrimental effect if you aren’t able to deliver the workload or the products at such a pace. To scale means you are able to take on the increased workload in a cost-effective manner and meet the demands of your business without suffering or overstretching. It’s about getting a comfortable handle on the increased workload, customers or users and then delivering.
When every new business starts out they need to be looking at scalability, not just profit growth. Start with your business plan and your sales and marketing strategy, and determine how scalable these are. Think of scalability as the acid test on whether or not your business plan is achievable. It’s the reality check you need to make your business work, which should be closely followed and referred to throughout your business operation.
Every business starts out with the objective to grow. The aim is to get to breakeven point, where your costs are covered, and you can begin to make a profit. But this needs careful planning. If you don’t look at scalability then you are effectively taking a scattergun approach to your business plan. It may work, but it also has the potential to fall flat on its face.
Scalability is the capacity to be changed in scale or size. Rather than focus on the ‘change’ aspect, it’s about focusing on the ‘capacity’ element. Consider the key components that really drive the capacity. Here are some key steps to give you an idea:
1. Determine your milestones
Outline the objectives that will set you on a successful path for business growth. Know what it is you want to achieve and the effort level required to get there. Is this achievable under different conditions?
2. Identify the risks
Factor in the changes that could make or break your business. Do you have the provisions and resources to respond to things like an economic downturn, saturation of new competitors, staffing issues or production problems?
3. Keep a close eye on sales
Volume of sales is the key indicator on how your business is performing. To ensure you are profitable, you need to adjust your expenses in line with your sales patterns. If sales drop right off then you know you need to scale back. If they suddenly increase, you need to upscale quickly.
4. Hire carefully
Staffing is one of the biggest costs to a business. Expand too quickly and you face an expense that may be hard to recoup. Equally, if you don’t expand enough, you may not be able to meet demand. Scale your staff with demand and have the ability to adapt quickly.
5. Maintain good relationships
Good relationships with suppliers can sometimes make all the difference when you are under pressure from increased demand. This holds the potential for you to source products, materials or staff much more quickly, to react to changes in sales.
If your business is ready and prepared to accommodate growth then your business is much more likely to survive. Not only will it have the ability to make it through periods of short-term growth, it will also have the durability and longevity to remain on the path to success.
Here are some of the benefits of having a scalable business:
1. Improved efficiency
Scalable businesses are more efficient because they plan for all eventualities and ensure they can operate in different circumstances.
2. Consistency
Similarly, if a business has factored in scalability, they are expecting to be successful throughout the ups and downs by being prepared.
3. Adaptability
Maintaining the flexibility to adapt to economic changes and pressures, knowing when to up-scale or down-scale as required.
4. Longevity
Businesses who carefully consider scalability are much more likely to survive long into the future because they have made provisions to do so.
5. Competition
It goes without saying that if you have a scalable business and are successful as a result, you are a strong competitor in your field.
Scaling isn’t just about increasing or expanding. You also might need to scale down to meet lower demands. This could be as a result of natural peaks and troughs in your business cycle, or as a consequence of a recession or a fundamental change in your industry that is out of your control. Either way there are lots of factors that can make or break a business so it’s important to be ready for whatever comes your way.
Scalability is about knowing when to change tact and having the resources to do so. If you don’t prepare to scale then you can pretty much prepare to fail. It’s that simple.
When you hit an economic boom and your business is seeing rapid growth, ensure you have provisions to meet demands. This might mean having access to greater volume of products or the ability to quickly increase staffing levels to deliver a service. It may also mean having a cash flow plan that is sustainable and funds that can be moved about quickly.
If there is a downturn or a sudden fall in demand, do you have a plan in place to cut-costs and streamline the business so that it’s still running efficiently under pressure?
Ultimately your business plan should take into consideration the changes that put pressure on scalability. This should be the key driver for your marketing plan. If there is a limit to the production you can churn out, there is little point executing a marketing strategy that is going to give you more sales than you can handle. It’s about finding the right balance to ensure your business can adjust to the ups and the downs, and knowing when to take your foot off the gas or step it down to comfortably meet the changing demands.
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