Your business model ultimately determines how your company will profit from the products you make or the services you provide, outlines the mechanics of how you will be paid, and how much money your company will make in a given period. It also sets the stage for five items critical to a company’s potential for real growth – which I have playfully punned as the “’Bilities.”
Now the ’bilities are not a backwoods family living remotely in the Ozark Mountains, passing their time angling for catfish, hunting rabbits, and making moonshine. They are five ideas that frame your business model so that it is more robust, flexible, and longstanding. The concepts I am referring to are:
- Scalability
- Replicability
- Sustainability
- Profitability and…
- Certifiability
In this blog, I will focus on Scalability…
Scalability is the ability to ramp your operation up or down, growing or reducing in scale, number, size, or locations. Ease of scalability is a key dimension, as are cost and time relating to scaling the operation to respond to growth, new customers, and demand from your current geographic location or other.
Scalability is so often overlooked by the small business owner for the simple reason that he or she is so overwhelmed with just getting their business up and running and keeping it afloat, that the concerns surrounding the notion of scalability may seem a bit distant or even a luxury to think about when compared to the day-in and day-out needs and pressures of running a small business. However, don’t be fooled! I discuss it as the 1st “Bility” because it constitutes the foundation on which you build your small business. All of the basic functioning of your business pass through the notion of Scalability – here, I’m referring to processes, policies, procedures, and all the other ‘nuts and bolts’ that make up the workings of your operation.
So now you ask… more specifically, what exactly am I referring to? To make this a little more interesting, I’m going to ask a series of questions that will illustrate how important scalability is as the 1st component of your “Bilities” assessment. Here we go…
1. You just got that big order you and your sales team have been working on for months. Congratulations! Now…do you have sufficient raw materials on hand to deliver it? Is your current labor force sufficient to not only produce this new order but deal with the ones you already have on hand? If you don’t have sufficient labor – do you have a solid and dependable process for identifying, interviewing, vetting, and quickly hiring additional staff that you’ll need to handle this and the following orders?
2. Your business is growing by leaps and bounds. Orders are up 150% and coming in at double the frequency you’re accustomed to. Can your Invoicing and billing systems keep up? Are they designed to easily scale to meet these types of increases in demand?
3. You just landed a new account in Albuquerque, New Mexico and your operations are headquartered in Dallas, Texas. You need to put people on the ground immediately – is your operation scaled sufficiently to have the financial capital to staff, outfit, and fund the added payroll (including taxes) of your new team before you get paid your first invoice from your new account?
In addition to these examples, some other basic questions you may ask related to scalability include does it take months and cost a fortune to scale your operation? Or is scaling fast and easy? There are countless scenarios that I’m sure we can think of, depending on the type of business you are in, but the important questions to ask are: have you considered the impact scalability has on your business, and if needed, could you effectively and adequately scale your business at a moment’s notice if you had to?
Scalability is the …”OK, now what do we do?” of running a small business and needs to be contemplated upfront so to avoid getting blind-sided by your very own success and growth – something you’ve worked too hard for to let happen, and that’s why you need to spend some serious time thinking about and preparing for the advent of Scalability.
To learn more about the benefits Factoring offers to business owners, please check out some of the other blogs on this website, or you may contact us directly at info@eifunding.com. You can also find me on Twitter and LinkedIn.
Thank you and best wishes for success,
Ernane
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