Starting a business is no easy task. Gaining traction and managing business operations requires dedication, in-depth research, and extended effort. Many entrepreneurs utilize strategies such as product validation, SEO, and other methods to maximize their potential for success. However, expanding your business and experiencing growth is an entirely different thing.
Scalability is a word that all aspiring entrepreneurs should become familiar with. But what actually is it, and how can you implement it into your startup?
In this article, we will define a scalable startup, as well as look at its advantages. Additionally, we will go over how to make your startup scalable. See the table of contents below to better navigate the article.
Table of Contents
What is a scalable startup?
Scalability refers to the capacity of a business to experience growth and meet increased demand without hindering its operations. A scalable startup is an emerging business that adopts a business idea that has the potential to expand rapidly and profit greatly.
To be scalable, the business idea should be:
- Innovative
- Able to be repeated/automated
- Convincing to potential collaborators
- Profitable
- Flexible
- Gain global reach
There are numerous examples of scalable startups, primarily in the technology industry. In particular, OpenAI, a business focusing on developing artificial intelligence, has emerged as a leader in the AI industry. The company has pursued technology-driven innovation and has developed prominent tools such as ChatGPT and DALL-E, both of which the company has profited greatly from. These AI technologies do not have to be manufactured, making them reusable and allowing OpenAI to meet increasing demand.
In addition, OpenAI is constantly pursuing research and development in the AI field, ensuring that it stays at the forefront of AI development. This has attracted record-breaking amounts of funding to the startup and has attracted the likes of Microsoft, who plans to invest billions into the startup.
Advantages of a scalable startup
Scalability plays a key role in the growth and profitability of a startup. It allows businesses to expand their products and operations, seize new opportunities, and adapt to new challenges. Expansion in startups without sacrificing the quality of their offerings or efficiency in operations allows them to work with more resources and customers. Additionally, scalability will attract investors and partnerships which can help them outpace competitors and rapidly progress a startup’s growth.
What is the difference between a scalable startup and a small business?
What differentiates a scalable startup and a small business? The main difference is the business model and idea, as well as the strategy for growth. Scalable startups are focused on developing an innovative idea and disrupting an existing market, or potentially creating a new market. They concentrate on rapid growth and scaling. Conversely, small businesses adopt a business idea that relies on previously established markets and business models and focuses on stability and stable growth.
What type of business model is most scalable?
Whether you are looking for inspiration, or potentially wish to validate your business idea, you may be wondering what type of business model is most scalable. While this answer will vary depending on factors such as personnel, industry trends, demand, strategy, and execution, some business models generally inherit scalability more than others. These include:
- Technology companies (Microsoft)
- E-commerce companies (Shopify)
- Subscription-based companies (Netflix)
- Franchise companies (McDonald’s)
- Platform-as-a-Service (PaaS) companies (Meta)
How do you make your startup scalable?
Let’s dive into 6 ways to make your startup scalable.
Cultivate a strong business idea and strategy
It all starts with the idea. Your business idea should possess the aforementioned qualities and be capable of rapid expansion. The plan of scalability should start as early as possible and be one of the main concerns when planning out your business. This means understanding how to scale and creating a strategy for scaling.
An effective strategy is just as important. Your startup’s business strategy should aim to outline the goals your startup wishes to accomplish, as well as how to achieve them. The strategy should be used to maintain a clear focus on objectives and keep the startup on track to reach them.
Hire the right team
Successful businesses need the right people behind them to maintain success. Walmart employed a staggering 2.1 million people in 2023 to maintain the stability and functionality of its operations. Scalable startups should focus on staying lean, and only hiring when it is necessary to the expansion of the startup.
Your team should share a similar vision and hold common goals. They should exert great effort and have a willingness to learn and improve. You should strive to hire individuals who are smarter than you or have a different set of skills to improve the startup’s capabilities and create different approaches to tasks and problems.
It is equally important to lead this team effectively. You should display desirable characteristics that fortify your position as a leader. Your employees should look up to you and be able to express themselves around you. A culture should be cultivated that encourages collaboration and productivity.
Acquire funding
Raising capital for a startup is no easy task. In fact, only 0.05% of startups raise venture capital. Despite this, many startups receive funding from angel investors and other collaborators. Funding is essential to the early stages of a startup and is generally used to get the startup’s feet off the ground.
If your startup is able to acquire investments, then it will be able to lessen its financial burden and reach its potential. It is a significant milestone in a startup’s journey to growth.
Streamline operations
To be successful, your startup must have a foundation to build upon. This foundation is your operations, an integral part of your business. Your operations can be the determining factor between success and failure, whether you deliver a product on time, and whether your customers are satisfied. Streamlining operations leads to increased productivity, lower costs, and better time management.
Some ways to streamline operations include:
- Automation – Automating existing processes such as customer service or accounting can significantly free up time and resources. One method of doing so is to leverage emerging technologies such as artificial intelligence.
- Delegation – Delegating tasks to employees or third parties can maximize productivity and save time. As an entrepreneur, delegation allows you to utilize your creativity for management and innovation instead of enduring monotonous tasks.
- Assess existing processes – Assessing existing processes and workflows provides a look at how things are done in your business, as well as what can be improved.
Encourage customer retention
To scale, you need to encourage customer retention. Customer retention is essential for growth as it provides sustainable income, decreases marketing spending, and increases profits. Additionally, it is significantly cheaper than customer acquisition.
In order to encourage customer retention, you need to prioritize customer satisfaction and make them feel valued. This means providing exceptional customer service and building a smooth sales funnel. Customers can also be incentivized through loyalty programs, referral programs, email marketing, and more.
Prioritize growth
Identify and prioritize the areas that are most capable of growth. What this essentially does is create opportunities for new revenue streams, target new customer bases, and build strategic partnerships. Scalable startups should create growth strategies that aim to outline clear objectives for expanding the business.
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