A scalable business could increase its profits and achieve rapid growth and expansion without facing a significant increase in costs. According to McKinsey & Company, companies that successfully scale up may experience an average increase in revenue of 40%-60%. Find out whether your business is scalable with our guide to the signs of scalability in business.
Key Takeaways:
- Business scalability focuses on your company’s ability to adapt and handle growth and expansion.
- There are different signs of scalability to determine whether your business is ready to scale up.
- An efficient business model is essential to business scalability.
What is scalability?
Scalability in business refers to your company’s ability to adapt and maintain performance as it grows. This growth often comes with increased workloads and market demands. So, it’s important to know what stage your business is at, to ensure it doesn’t try to grow too quickly.
Understanding scalability for your business
There are ways in which you can measure the potential scalability of your business. This will help give you a better understanding of what you may need to do to grow, now or in the future.
Here are some signs that your business may be ready to scale up:
Your sales and profitability are growing
Growing sales and higher profits are a key sign of scalability in business. This suggests your company may be financially able to fund expansion. Scalable businesses tend to have profit margins of over 50%, and they can handle their operations with limited support staff, relying mostly on automation and technology to boost efficiency. Such companies are generally more likely to win approval from investors.
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Your teams have more potential
Are your employees showing they’re ready for growth opportunities? Or are they struggling to maintain their existing workload? This is another useful way to identify whether your business is ready to scale up or not. If your team isn’t quite ready, you might want to consider implementing training or other incentives. This might encourage people to level up and become more equipped for business scaling.
Your current model is holding you back
Did you know that changing your current business model could be the key to scaling your business? Inefficiencies in your operations and processes, like skill gaps, logistical issues or problems with leadership could be holding your company back. By dealing with these limitations or bottlenecks you could help create a more efficient business model. With this, you may find you’re able to scale up your company effectively.
New areas are opening up for you
Being open to innovative ideas and exploring different areas is also important for business scalability. Whether you run a restaurant or a beauty parlour, new areas bring new opportunities – this can be anything from additional markets to new services. You could introduce different ways of selling your existing offering, through alternative marketing techniques.
If you’re finding that new areas are opening up for your business to expand into, this could be a great sign of scalability.
Your infrastructure can meet increased demand
Finally, consider your business’ infrastructure and whether in its current state it could accommodate an increase in demand. If it isn’t ready, don’t worry – what’s important is that you develop a plan to build the next level of infrastructure, without terminating your existing one. This plan should outline who and what you’ll need to reach the next step in the scaling of your business.
Business scalability - FAQs
How do you show business scalability?
To show business scalability you need to demonstrate that your business has the right assets and attributes for scaling up. Maintaining and improving the profitability and efficiency of your products and services, even with an increased workload, is key. To do this, you’ll typically need to place key focus on fine-tuning your business model, operating structure and workflow strategy.
Why is scalability important in business?
Scalability is important in business as it can help your company step up into higher tiers of activity and ultimately achieve its maximum potential. When scaling up your business, you may see increased profitability without seeing a significant increase in costs. This can be beneficial for small and medium-sized businesses (SMEs) as you can generate additional revenue without having to exceed your budget. This may also take place without incurring additional financial risk.
What is an example of business scalability?
Online retailers and other companies that operate over the internet are a good example of scalable businesses as they can maintain and increase their products and services with low overheads. For example, they don’t generally require high numbers of staff or office space.
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Disclaimer
This has been prepared by Tyl by NatWest for informational purposes only and should not be treated as advice or a recommendation. There may be other considerations relevant to you and your business so you should undertake your own independent research.
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