Starting a business with a big vision is exciting; building a sustainable yet scalable company is challenging. It needs a scalable business idea. How do we know if our business idea is scalable? Imagine you have started a small business, and unexpectedly, it has started to do very well, with many key customers on your list and many more orders expected in the next quarter. A question crops up suddenly:
- Is the business scalable?
- Can it handle the orders in Q2?
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This is the typical scenario for start-ups or small businesses. Notice that in the above scenario, the questions are asked after the business is launched. This article attempts to stem such questions before the launch and some questions during and later. Besides asking questions about the quality of the idea, it is prudent to consider aspects like:
- Should the business scale at all?! (All further questions stem from a ‘Yes’ to this.)
- Can it handle the pressure of growth?
- What does it take to build it that way?
- What are the regulatory considerations?
Jeff Bezos did not start Amazon to sell books online. He clearly envisioned where he wanted it to go and grow. At its inception, Amazon built a platform that could scale up to sell books, groceries, and much more, all online.
Key Signs of Scalable Ideas
A business idea is scalable when it does not need additional costs to expand and multiply revenue. It is like a tree—once a sapling that needed care, but now it grows independently without much care. There are some areas that need a deeper understanding of the business sector that can nurture the scalability of an idea.
A genuinely scalable idea should answer these primary questions:
Is automation part of the plan?
Dependency on personal is a sure sign of an idea that cannot scale. As business scales, so does manpower, and that costs.
Can the model be replicated easily in new markets?
The idea that provides easy relocation, recreation, and re-modelling is a scalable idea.
Does it provide high profits?
If an idea does not need redesigning or increasing manpower needs as the business grows, it is scalable.
Will it have sustained demand?
An idea that has chosen an industry segment with sustained dependence, such as food, services, hospitality, consumables, health, etc., is a sure-shot scalable idea. Take the example of McDonald’s outlets. This is a typical business that answers all the above questions.
Automation/Replicability:
Most processes are automated and replicable in different market scenarios.
High Profits:
Since the process is automated and easily replicable, installation and training costs are low, and manpower is optimized.
Sustained Demand:
The food industry is perhaps one that can never lose out on demand!
Ready with the idea? What next?
If the scalable idea chosen is to build a hospital, say, then it becomes mandatory to study the following:
- Obtain data on cities that are popular in the country.
- Has potential for more residents to enter that locality.
- Other hospitals in the city. Competition!
- Is it an up-market crowd for better profit margins?
- Is geographically large for future expansion with branches.
This amounts to assessing the market potential from the angles of:
How to handle competition. Is it flexible enough?
Performing a dry run by creating an MVP (Minimum Viable Product) deployed in the market. This provides invaluable information and indicates what is expected in the future and what needs to be tweaked to correct some aspects.
This is the story of how Dropbox launched a video that showcased what can be done on Dropbox. This was the MVP for the idea. They learnt that there was tremendous demand for this idea from all quarters. Later, a full-fledged application was launched into the market, and now it has become a successful multi-billion-dollar business. Software products are the most flexible!
Other factors that help the scaling of businesses
These are some of the factors that need to be kept in mind while evaluating a scalable idea.
Delegation: A good team selection is primary; delegation will allow leadership to think about scaling.
Infrastructure: Scalable infrastructure needs to accommodate business growth.
Customer base: Increasing customer base is one way to increase revenue.
Services and Products: Expanding the range of services and products is another way to increase market share.
Enter new markets: This also needs further planning and a company SWOT analysis to see potential in other markets.
Retention of Customers: This can be done by allowing subscriptions, memberships, and earning points to be redeemed. Keep the customers satisfied!
Franchising the business: This can happen when the business has matured and is confident.
Outsourcing non-core businesses: Jobs like housekeeping, EHS (Environment, Health, and Safety), and infrastructure may be rented instead of owned.
The best examples are the giants like GE, IBM, TATA, WIPRO, etc.
Challenges to Scalable Ideas
Just like we need to provide enough space for a coconut tree sapling, a business model also needs to provide space and opportunity for growth without bursting at the seams.
Consider the following:
Financial planning: Save for rough weather, but set aside a chunk for R&D and expansion.
Maintaining Quality: A growing business can always sacrifice quality for quantity to meet targets. To this end, quality consciousness must be built in employees and associates.
Human Resource Management: A good team is primary to a successful business, and an expanding one requires the most care.
Conclusion
Not everybody is a genius, so learning from others is another quick way. Investigating how successful businesses happen gives a clearer picture of what can be considered a scalable idea. Airbnb and Uber’s success stories are classic examples of these scalable businesses. Note that the quote
“99% perspiration and 1% luck” still holds in this domain! That 1% is good old humility and being wise.
