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SCALABILITY

Accelerate your business with these expert tips on "Scalability". Analyse and discover this TIP!

We talk about "scalability" when the revenue growth of a model does not need to be accompanied by a proportional increase in investments and expenses. I can double sales without doubling expenses or investments. I have to design every key activity of my model to make it scalable. That is, I have to make most of my model scalable. See also the concept of leverage.

If you want to finance the growth of your company with the entry of a private investor, such as business angel o venture capital, you have to demonstrate that, in addition to being viable and feasible, your model is investable.. That is to say, with a clear exit and a potential for growth and scalability (see I am looking for a partner).

Scalability is therefore a key and selective criterion for all investors, and it is also very useful for your company.

In graphical terms it could be represented as follows:

As we can see, there comes a point after the break-even point, or break even where revenues grow exponentially. However, expenditure grows in a linear fashion o, in case they grow exponentially, at a slower pace than revenues.

Revenues are then decoupled from expenses "disproportionately" and make earnings growth exponential, like value creation. There are two competitive advantages The most interesting benefits derive from economies of scale or from the accumulated learning curve.

Many entrepreneurs have succeeded in designing start-ups or emerging companies that, through the use of technology, grow quickly and rapidly while maintaining flexible and adaptable structures in line with market developments and at relatively low costs.

NOT all companies with high growth potential are scalable!!!

They are different concepts. A business model can have very significant growth potential, even double-digit growth, but not the potential for scalability.

In the high scalability model, the benefits accrued as value generation are much higher than the benefits accrued in the growth model (without high scalability). In other words, over the same time horizon and similar cost structure, the scalable model generates higher value than a model with good growth potential but without significant economies of scale.

This is why many investors require the business model to be scalable. So that value creation occurs quickly, and disproportionately (in the positive sense). Scalability in a Startup improves the return potential for investors. In addition, a highly scalable model is likely to have a process of internationalisation simpler as it will not require significant additional structures once it is already developed in the domestic market.

"Scalability" is used in technology to refer to the property of increasing the working capacity or size of a system without compromising the normal operation and quality of the system. A scalable system can increase the number of users, the number of data it processes or the number of requests it receives, without significantly affecting its speed of response.

EXAMPLE:

DNS New domains are created every day and the speed of access does not decrease. If new functions can be added to a product or system with minimal effort, the system is said to be scalable.

We recommend that you complete a acceleration week to make your business model scalable!

APPLY THIS TIP TO YOUR PROJECT

TASK

Now that you have read the TIP, answer these questions:

  1. Do you have great potential for customer growth?
  2. What are your bottlenecks?
  3. Can you double your customers without doubling your costs?
  4. Which activities in your model are scalable today and which in the future?

QUIZ

THINK ABOUT YOU

THINK ABOUT HELPING OTHERS

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  1. BUSINESS MODEL - Mentor Day WikiTips

    [...] A business model is the mechanism by which a business attempts to generate revenues and profits. The model is the way of doing business, by which a company generates revenue in a profitable, recurring and scalable manner. [...]

  2. Target, customer segment - Mentor Day WikiTips

    [...] For your business to be successful, it is essential that you are very clear about your customer segment and that you focus all your efforts on satisfying them correctly. Finding what they have in common will allow you to grow and scale. [...]

  3. Product market fit - Mentor Day WikiTips

    [...] Ultimately, the whole lean startup methodology focuses on the company, before running out of resources, coming up with a plan that works; in Blank's words, that creates "a repeatable and scalable business". [...]

  4. MIT Entrepreneurship Steps - Mentor Day WikiTips

    [...] How to make the company scalable? [...]

  5. HOW TO SET THE SELLING PRICE? - Mentor Day WikiTips

    [How much is a glass of water worth? If I am in the desert about to die of thirst, how much am I willing to pay? The price varies according to the perceived value at any given moment. When we sell online, we can't be in front of the negotiating table because we would lose scalability. [...]

  6. José Luis Prieto Calviño

    Growth Potential vs. Scalability Potential

  7. Paul Lejarza

    Interesting TIP that values scalability and with which we will agree as long as it increases its capacity and manages to cover a higher demand without losing quality.

  8. julio urgiles

    for Mentordy.
    I am satisfied with the teachings and methods and every day the tips are of great help.
    I am Ecuadorian with my project to reside in Spain to manage the business I am launching.

    1. Jaime Cavero

      JUlio for us to help you to settle in Spain you must register and complete this programme. https://mentorday.es/softlanding/

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