Millionaire Mindset series 18: Go For Scalable Business Models

Scalability is one of the most important factors for entrepreneurs considering starting a new business or hoping to take a current business to the next level. Successful business growth depends on a scalable business model that will increase profits over time, by growing revenue while avoiding cost increases.

When you’re developing new business ideas, the future growth of your business might not be the first thing on your mind. If you keep scalability in mind from the start, your business stands a better chance of succeeding in the long run. Scalable businesses are designed to handle increased demand seamlessly over time, so consider scalability when you’re choosing a business idea to ensure steady growth without any growing pains.

If you wait until your business is already up and running to consider scalability, you might miss out on an opportunity to streamline the growth process. Your capital structure and marketing plans may not be able to accommodate rapid growth, leaving you behind the curve just when your customers are demanding more from you. When customers are ready to buy, you should be ready to give them what they want. A solid yet flexible growth plan lets you anticipate changes in the market so you can respond quickly to increased demand.

Highly scalable businesses grow exponentially. They are not weighed down by the same sales-cost growth relationship as linear models. Instead, as sales increase, costs stay flat, allowing for higher levels of profit over time. Businesses with high scalability grow with lower capital requirements, making them more efficient and more attractive to initial investors.

For some types of businesses, the economy of scale helps make building your business more feasible. Growth should involve lower costs, because products get cheaper to produce or purchase from suppliers in bulk. Operating costs, including employee pay, maintenance, and equipment costs, should grow more slowly than your revenue does in a scalable business. Determining whether your business idea is scalable from the start helps you decide whether it’s something you actually want to pursue.

Efficient and profitable business scalability is all about increasing output while keeping costs low. This type of business model will increase profits over the long term, increasing enterprise value. Rethinking the business model to make it more scalable may just give you the edge necessary to secure new customers and grow your business exponentially.

Ultimately, the scalability of your business is determined by the size of the overall market. Research your industry to determine how many potential customers there are in your local area, throughout East Africa and around the world. Identify any competitors who might already have captured market share in the industry, and study those competitors to determine whether they are prepared to scale up before you get there. By focusing on all of the aspects of scalability before you even choose which business idea to pursue, you set yourself up for long-term sustainability.