Is Scalability THAT Important?
Everyone is talking about scaling their business, but should it really be their goal?
Every business starts small.
If it’s successful, it grows.
This summer my daughter saw some girls making and selling bracelets in the courtyard of our apartment complex. She immediately wanted in on the action and instructed me to go get her arts&crafts box.
I suggested that this wasn’t the best of ideas as there simply would be too many bracelets and too few customers. If we were going to do business-in-the-yard, then we should offer something different.
My revolutionary (she and her friends were impressed) suggestion was that she start selling lemonade. After all, it was a hot summer in Europe and she makes a killer homemade lemonade.
Those of us growing up before the mid-90s have all had our run of either selling lemonade, washing cars near the gas station, clearing the snow, you name it.
The reason I mention these examples is that the business could have consisted of just selling 1 gallon of lemonade and going home. Or going through 1 bottle of car detergent and going home.
A profit was made. For a kid, it may have seemed big, but it was modest, because how much overhead can you really make on 16 cups of lemonade?
Scaling explained
Scaling is exactly what it sounds like — making the business bigger.
We start with one lemonade stand, followed by more stands for the neighborhood, then even more for the rest of the city’s neighborhoods.
Fast-food chains and the HoReCa industry are easy examples to grasp, but the principle can be applied to any industry.
Take the performing arts as an example. When Guy Laliberté started Cirque du Soleil back in 1984, it was a 1-show operation. With time, the company established a presence with permanent shows in Vegas and several touring shows across the world.
Cirque’s founder created a unique product that was in demand and he pursued to grow the company exponentially. The easy way would be to function like a regular theatre and just produce a new show from time to time. But Mr. Laliberté truly scaled up his business (with the help of Vegas investors and partners, of course).
The same has been done with software companies: first, the software tackles a specific issue in one area and then the company finds applications for the software for a larger audience.
What about your business?
Not every business is scalable like a fast-food chain.
I mentioned Cirque du Soleil, but I also mentioned theatres. There are very known theatres around the world, but their product remains local with the occasional show going on a tour.
Not every custom printing business will go global like Printify.
But these businesses had the potential to scale up: scalability. It had to do with the business structure and with a clearly laid-out business plan. Or sometimes that business plan came up in the process of the business’s success.
When planning your business you need to try to honestly answer the question of whether you want your business to be scalable or not. It’s perfectly fine to plan a local craft brewery without planning to take it global. The localness is what can make it a unique and local success.
Or you can plan a company that you’ll test out and tweak locally, which you can later take to more markets. Does it have it be part of the plan right away? Not necessarily. But you need to be able to make adjustments to the plan, as your business grows.
Back to the lemonade example.
The recipe is killer and it can bring in profits by selling the lemonade in one’s backyard. But if we need to deliver the lemonade to the whole neighborhood, it might make sense to adjust the recipe so that it yields a bigger batch. This may require an investment into a bigger pot. But that investment can eventually pay off with the lemonade costing less than making it at each local neighborhood stop. Or the solution may be to pre-prepare something at your “home base” and deliver those preps to your neighborhood stops (à la the fast-food franchise model).
To figure out what’s best, you need to be ready to accept the best solution and be ready to consider all options.
In that sense, your business may not be planned to scale, but if identify the potential and are ready to adjust, you can reap the results.
Should you plan to scale?
The choice is yours.
By adjusting your goals and business plan to make your business scalable, you will likely optimize your processes before actually spending money. That can save you much-needed funds that any new business requires.
By asking yourself if your business idea is scalable, you’ll also be looking at your business differently. Different angles are important.
The initial question will lead to other specific questions, which will better prepare your business for all the surprises that lie ahead. And it’s absolutely fine to come to the conclusion that the business is not scalable and to pursue it anyway.
If you’re wondering, my daughter didn’t end up selling lemonade, but she did make lots of business plans. Maybe next summer, she’ll actually start the lemonade business.
