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Is Your Business Idea Scalable?
Scalability is the main reason your business is financially viable, even if you want your company to stay small.
When entrepreneurs have an innovative business idea, they usually think about how much their new product or service could improve the lives of potential customers. It's exciting. I know. However, entrepreneurs should consider many more things before their business idea can become financially viable.
In addition to all the technical and legal aspects of creating, producing, and delivering a product or service, it's crucial to identify your target customers and how much they are willing to pay. The answers to these questions are part of several factors that will determine if your business idea can turn a profit.
However, few entrepreneurs ask themselves at an early stage whether their ideas are also scalable.
Suppose your company can produce 10 units of the same product every month. Suddenly, your product becomes a big customer hit. How quickly could you ramp up production to make 100 or even 1,000 units? If your product doesn't easily scale, you can't. Instead, you would have to face an expensive and time-consuming product redesign to enable production in larger quantities, delaying your rollout and potentially missing a market opportunity.
Scalability Is Essential Even If You Want Your Business to Stay Small
Even if you want your business to stay small, scalability is essential.
As a retailer, whether you offer five products or 500 makes a big difference in the way you run your online store. You may be able to handle five products with pen and paper. But tracking and transacting a catalog of 500 items is another level of complexity.
As a contractor, event manager, or interior designer, it is much easier to manage a single project at a time than five or ten going on simultaneously. Working on multiple projects in parallel requires standardized processes, excellent logistics, and clear responsibilities between all team members within and outside your organization.
In most cases, scalability is the main reason your business is financially viable.
A product or service may not be profitable if you only deliver a few. But if you provide them in larger quantities, the margin contribution of these additional units may exceed your overhead costs and turn your business idea into one that could be interesting to pursue.
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