How does a company become scalable?

If there is a high demand for your product or service, you can build a business out of it. But can you scale your business? Some businesses are scalable, meaning they can grow revenue exponentially. Others are not open to growth, but generate a reliable income that is not lucrative.

Here’s how to tell if your business is scalable:

1. Operating leverage

Companies that scale have operating leverage. If your business’s operating costs are increasing at the same rate as your revenue is growing, then your business is not scalable. But, if the extra income needs moderately small additions to operating costs, congratulations – your business is scalable!

2. Your business is scalable if you can handle a sudden increase

Most service-based businesses rely on talented employees and custom solutions, making it difficult for them to handle a surge in new sales or customers. These companies cannot handle an increase in demand, so they are not easily scalable.

For a technology company, its core product can serve millions of customers because it only needs increased bandwidth and hardware to handle increased load. This company is scalable as it can deal with a sudden influx of customers.

3. It is positioned in a large market

If your company is positioned in a large market and can take market share from others, then it is scalable. However, if there is not a high demand for your main product, it means that your company cannot scale even though you have a systematic process of producing the product.

4. Is your business set up to function without you?

One of the reasons most small businesses aren’t scalable is because most can’t operate without the owner. So the business is not scalable because the business owner is not scalable. If your company needs you and your effort, it is not scalable. It is a built-in career.

For a business to be scalable, it must be able to operate without the owner. This is good for you because you have more time to work on big projects or start new ones.

5. Can your business produce a consistent and predictable result for customers?

There is nothing wrong with running a service-based business. The only problem is that it is difficult to scale the business because you need a customized solution for each client. A custom solution cannot deliver a predictable and consistent result as it is not repeatable. Therefore, for your business to grow, you must learn to take what you do and produce a process that can be applied repeatedly to deliver a consistent and predictable result to different customers.