Is Your Business Scalable, and Why Is This Important?

Thursday, 28 August 2014 Andy Anderson

business tax deductionIs the health and longevity of your business tied to your ownership?  We’ve all heard about the importance of making your business “scalable,” but what does this mean, and how do you do it?  In a recent article on Inc.com, “The Secrets of Building a Scalable (and Sellable) Business,” the author stresses the importance of finding ways to make your business concept into something that can be replicated quickly and easily.  Focus on something that you can teach employees that is also valuable to customers and repeatable, with the goal of creating a recurring revenue stream. 

Making your business scalable will depend a lot on your industry, the size of your business and its uniqueness in the marketplace.  It’s hard to find scalable business models in some industries, such as real estate agencies, especially when their only assets are their salespeople.  

First, make it teachable

Focus on one thing, or a single segment of a larger universe, and scaling your business becomes much easier.  For example, if you own a cleaning business, consider specializing in eco-friendly cleaning with safe and natural cleaning products.  Go after a specific niche audience and position the business to appeal to this group.  Teach employees what these homeowners want and how to deliver it flawlessly, and then develop a training program that can easily be taught by your employees. 

Find something of value

A second important aspect of building a scalable business is finding something valuable that isn’t currently being commoditized.  By narrowing the focus of your business and differentiating it properly, you will automatically strengthen the company’s value proposition for potential customers.  By becoming an expert on this narrow area, your company will develop a reputation among those seeking solutions.  A good example of this might be a family lawyer that specializes in helping single parents collect child support.  This is one of the most litigated issues in family courts, and most people try to do it without a lawyer.  However, if you flaunt your track record and price it right, a law office can offer a turnkey suite of services that is easily scalable for growth.  

Start, Grow, Repeat

The final element of making your company scalable is creating a recurring stream of revenue.  While not every business can do this easily, it is the definitive way to build a strong and lucrative business.  This concept doesn’t necessarily translate to franchising; it can also be a repeatable service that can be renewed or subscribed to by customers.  A good example of this is the Massage Envy chain.  People don’t just come in for one massage; they buy a membership that gets them an hour-long massage once a month and the option to purchase additional massages at a significant discount.  Not only will this provide the company with a recurring stream of revenue; it also allows them to upsell regular clients on products and optional services. Repeat customers provide the basis for some recurring revenue.

While the Inc.com article focuses on real estate, the whole idea of scalability is not limited to sales organizations.  It can be duplicated across virtually every industry and specialty.  If you are considering selling your business within the next year or two, focus on making it scalable and simplifying basic processes that will make it leaner and meaner.  

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