This article was originally posted on the 16th of July 2018.
A scalable business? Are you just talking about growth?
Well, no. There is a difference.
We all want business growth. We all want our businesses to be more productive and more profitable from year to year. That’s growth. To be scaleable, your business needs to have the foundations to deliver that growth fast.
Looking for a handy checklist that will walk you through all that’s needed when preparing your business for sale? We’ve created one with all you need – and you can download it here
The Zoom revolution
A perfect example through 2020 has been the explosion of video conferencing. Zoom’s growth during their first quarter of lockdown more than doubled their revenues; far outstripping what they had anticipated at $328m.
But without an ability to support the estimated 300 million meeting participants per day, it could have been disastrous.
Because Zoom had built their business with scalability in mind, they could handle the huge and unexpected influx of users.
What is a scaleable business model?
One definition of scalability reads
“Scalability describes a company’s ability to grow without being hampered by its structure or available resources when faced with increased production.”
And that’s it in a nutshell. The ability to grow without hindrance.
In this article we are going to look at the 6 aspects which underpin scalability. The foundations for success. We will also look at the link between a scalable business and business value.
Businesses that want to be able to scale quickly, need to be hiring the visionary people who will run tomorrow’s business. Don’t get me wrong, an entire business of visionary’s would achieve nothing without the steadfast ‘doers’ supporting them. As ever, balance is required. But it is the visionaries who will spot the growth opportunities, changes in markets and emerging trends before they become mainstream.
Think about Centre Parcs. Successful on the continent since launching in 1968, they only moved into the UK in 1987. It could have been a total flop.
Think about it. A country like the UK whose post war legacy was for cheap, working class, coach trips to Butlins. Introducing a luxury holiday camp concept could have backfired. It would have been easy to bypass the opportunity.
It needed the right people on the ground to lead the development. Leaders who shared and believed in the concept, who did deliver, ensuring it was fully booked from day 1.
2. Partnering with other businesses
Correct me if I’m wrong, but I don’t think it’s possible to buy a TV in the UK without it being pre-loaded with Freeview technology, and often digital tech too. Every smartphone is preloaded with Google maps. Would you consider buying one that didn’t, or would it look poor by comparison?
So with built in partnerships like these, it allows companies to remain competitive.
Other partnerships are optional. Like the extended warranty options when you buy your gadgets. Others think outside the box a little further like the pet product manufacturers who provide branded accessories for Land Rover.
Partnering your business with another can extend your market and open it up to many more customers.
Businesses now harness technology for accounting (Sage, Xero, Quickbooks) which free up staff to focus on other aspects.
CRM systems, online banking, video conferencing, mobile phones even. All these technology developments have helped to streamline business operations. Amazon couldn’t do what it does in home delivery without automated warehouses and robotics.
Harnessing technology to free up staff to do other tasks is one thing, but for things like robotics, they can operate 24-7. No holidays or lunch breaks. That adds capacity to your business.
What technology can you harness and what is appropriate for your business?
With the same principles as technology, what does your business take time doing, that you could outsource for the same, or even less cost?
When we started as brokers in 2005 a lot of communication was still mailed. And when it came to marketing materials to find new clients, we used to send hundreds of letters out. Printing, folding, stuffing into envelopes, adding stamps and delivering to the post office.
Volume was too small to use a postal service, until a new flock of companies emerged who automated this service for small business like us. All for the price of a first class stamp. We outsourced in a flash. Cost saving was one thing, but the time it freed up for us was the real driving factor.
What functions are you retaining in house that are also holding you back?
Scalability comes from growth. Most growth needs a marketing machine behind it to encourage people to buy.
Dare I say iPhone? Who knew we needed that until the paired down advertising launched it to market with just one word, “Hello”.
You can be the latest trend and within a few months the market moves on to the next big thing. We’ve all succumbed.
The Kevin Keegan perm
To capture something which will provide scalable growth your marketing strategy needs to be planned, robust and effective for the long term.
For your business to be scalable, it also has to offer something new. Either a completely new product development (smartphone) or an improvement on what went before (Centre Parcs).
Put time, and effort into creating new ideas and build a company culture where these can flow and be tested. E.g., could your company be an employee owned business?
Scalability affects value in multiple ways
Potential buyers aren’t solely concerned with past performance of a business, they need to be assured that there’s a future in your business too.
Geographical and in terms of capacity, could your business cope with international interest or spikes in demand? Our research has shown that businesses with international reach usually receive higher offers.
What problems would a substantial increase in sales present for the following;
If a buyer sees that to grow, you need bigger premises, that additional overhead is calculated in the total investment they are willing to make. Essentially, they lower your offer knowing they will have to spend on premises.
A business with in-built scope for huge increases in demand is much more appealing, especially for a buyer with plans for growth.
Scalability also demonstrates survival
Think about how you’d answer the questions below if a buyer asked;
What is the future potential of your business?
Is there room to expand into different markets?
Which markets would you approach?
Can you begin cross-selling your products or services?
What are your major competitors doing that you’re not?
During the 2020 pandemic, the term ‘pivot’ has come to the fore and there is a lot of crossover to scalability.
Where clothing manufacturers have pivoted to producing PPE. Where engineering companies have pivoted to manufacture respirators. Where eat in restaurants have pivoted to take away services. Where home delivery has come to the fore as a service where they were perhaps not offered before.
A crisis has forced these pivots. The scalable foundations of these businesses might determine if they remain. For instance, can a restaurant keep its takeaway service when eat in dining at full capacity returns?
We don’t like waste. It’s costly and unnecessary, but building in capacity to allow your business to quickly scale is not wasteful.
Examine your markets, look at your competitors and decide which aspects of your business need to be scalable. And if you’d like someone to work through these things with you, please get in touch.