Scalability
What is business scalability? Types and key factors
Scalability is a company’s ability to grow without being held back by how its structure and available resources are set up. Therefore, a scalable business is any company that can increase its revenue while maintaining its costs or by taking on very low costs to do so (the new revenue it generates is much higher than the costs required to increase that revenue).
1. Types of scalability
The goal behind scalability is always the same: increasing profits. However, there are two different methods to build a scalable business. Scalability can be both horizontal and vertical, and it’s most common to use a mix of both methods:
Vertical scalability
This is the fastest way and offers the most tangible results. Vertical scalability improves a single process or department by increasing resources. In other words, investing in a very limited area or space. This makes it the best option for short-term benefits.
Horizontal scalability
It allows for unlimited growth by adjusting allocated resources to achieve a profit more slowly (depending on the growth rate). You add more resources as needed, and it brings more benefits than vertical scalability, but implementing this scalability is more complex and requires more effort. In the long run, it’s the better of the two.
2. Key factors for a scalable business
Practically any company can be scalable, though not all of them. However, you can only achieve this by having a solid foundation of what it takes to scale your business. Some of the aspects you should keep in mind when choosing to scale a business are:
- Plan and anticipate. You must keep in mind the needs you’ll have to grow and be able to provide solutions for them.
- Size correctly. It’s very common to oversize or undersize the business, which dilutes its scalability potential.
- Look at the competition. The market and competition must be thoroughly studied to see if it’s profitable for the company to choose to grow.
- Know your MVP. You must identify the minimum viable product (MVP) that your customer would accept so you don’t invest time and money into a product or service that no one would be interested in buying.
- Promote self-service. As much as possible, you should choose to design self-service processes where customers themselves reduce costs compared to the previous business model.
- Set the investment. After an in-depth study, you must have enough financial and human resources to make scalability happen.