What does it mean to be 'scalable?'
In the entrepreneur world, you hear a lot of buzzwords thrown around. Words like "scalable, high-growth, venture capital, accelerator, etc.," can be confusing to new, and even veteran, entrepreneurs. When these phrases go undefined but are used to describe entrepreneur programs, it can be difficult to figure out if the program is the right fit for you.
Let's begin breaking some of these buzzwords down, starting with "What does it mean to be scalable?"
Scalable vs. Non-scalable
The biggest difference between scalable and non-scalable businesses comes down to how they handle growth.
A scalable business is one that has the intention and the ability to grow exponentially. Scalable businesses often have a product or service that can be replicated, delivered, or distributed efficiently to a large number of customers across a large region—even globally!
Key characteristics of scalable businesses
High Margins: Scalable businesses tend to have high profit margins, allowing them to grow quickly while maintaining healthy profitability.
Automation and Technology: These businesses rely heavily on automation, technology, and streamlined processes to efficiently manage increased demand.
Global Reach: Scalable businesses often have the potential to expand their customer base beyond their local region.
Examples of scalable businesses include software-as-a-service (SaaS) companies and IT, manufactured products for wholesale, food processing for wholesale, and transportation and logistics companies.
A non-scalable business is most often associated with “small business”. The intention of these businesses is to stay small, but successful enough to provide a comfortable profit for its owners. Non-scalable businesses often operate in industries where personal attention, labor, or physical resources are directly tied to the delivery of products or services.
Key characteristics of non-scalable businesses
Labor Intensity: Often for a non-scalable business, the service is directly related to a talent or skill set of the owner that is difficult to replicate.
Geographical Constraints: Non-scalable businesses are often highly localized serving a small community or region.
Limited Automation: These businesses have fewer opportunities for automation and technology-driven efficiency improvements due to the nature of their operations.
Examples of non-scalable businesses include traditional retail stores, local service providers (like hair salons or plumbers), and some types of artisanal or craft-based businesses.
What's the big deal?
We've now defined 'scalable,' but why is it an important term to know? Programs like business startup classes, incubators, and accelerators, use the terms scalable and non-scalable to help indicate which types of businesses are best suited for the program. As a non-scalable business, you wouldn't want to join a program designed for scalable businesses, because the structure won't match your business needs, and vice versa.
Being scalable is neither a good nor a bad thing. It's simply a way of describing the way your business can grow. Can non-scalable businesses still grow? 100%! You can always increase your revenue, your reach, and your impact while staying small and “traditionally non-scalable”. Can non-scalable businesses become scalable? Sometimes! It just depends on what the goals are for the company. Do you want your candle sold at every Target in the country or do you want to sell them at local boutiques and farmer’s markets? That’s the difference between scalable and non-scalable.
Take some time to think about your business model, and what you want to achieve with your growth, to determine if your business is scalable or non-scalable!