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What is Scalability in Business, and Why Is It Important?

by Mike Abelson   July 18, 2022
Scaling business operations is the goal of any growing business. If you're looking to expand your small business, here are the key steps to scale properly:
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The objective of any business is to grow. However, simply expanding business operations may lead to the inability to keep up with increased expenses. This can ultimately spell disaster for a growing company.

To mitigate these consequences, developing businesses must implement scalable strategies that allow for growth without significantly increasing costs. Scalability allows a company to grow and adapt to meet market changes and demands while maintaining efficiency.

If you’re looking to scale your operations, we outline some business scaling examples and benefits.

What is Scalability?

CEO looking at annual report projection

A scalable company improves and grows without diminishing its product quality and services or incurring unbearable costs. Instead, these businesses adjust their existing resources to adapt to increased sales and market demand. In other words, in the face of increased demand, the goal of scaling is to improve profitability and efficiency while maintaining low costs.

Successfully scaled businesses maintain their expenses while exponentially increasing their revenue. Therefore, maintaining low overhead is critical in scaling to ensure the company is not hemorrhaging money to keep up with demand. As a rule of thumb, when scaling, you’ll want to keep your expenses low and your profits high.

Benefits of Scaling

Aside from increased revenue, there are several reasons why scaling business production is beneficial to companies.

Meeting Market Demands

Companies must remain relevant with their consumer base to maintain success. One way to achieve this is to anticipate customer needs, buying behaviors, and wants. Implementing flexible strategies and operations allows businesses to easily pivot and adapt to consumer and market changes. By already having scalable strategies in place, your business won’t require added costs to accommodate your consumer’s changing preferences.

Growth

Establishing scalable strategies early on can set your business up for sustained, long-term growth. This is because your operations can become accustomed to stable growth, mitigating the stress and need to expand every time demand increases. For instance, if your company offers software-as-a-service, you may want to ensure that the platform can withstand large numbers of users. In anticipation, you may want to adapt your software to support 500,000 users, although you may only have 100,000 currently.

Efficiency

Scaling can help businesses invest in equipment, personnel, and software that strategically increases revenue while maintaining or minimally increasing costs. Growth is necessary for all businesses, but the downfall of many is uncurbed spending. Instead, scaling can help companies balance their spending and revenue to ensure maximum efficiency.

How to Scale Business

Implementing scaling strategies isn’t a one size fits all method. The way in which a company scales will depend on its size, consumer demographics, and product or service offerings. Nevertheless, we offer some fundamental approaches to scaling:

Leadership

CEO presenting business report to team during meeting

Knowledgeable and experienced management is needed to guide the business through the scaling process. Although it may cost more upfront to onboard experts in this field, it can save the company in the long run by helping avoid trial and error.

When scaling, the name of the game is efficiency. That’s why you want to surround yourself with leaders who can reduce the time it takes to manage and implement changes. Additionally, you’ll want management who is well-versed in scaling businesses to refocus objectives and align teams towards a common goal.

Strategic Hiring

To promote growth and scalability, you’ll want to hire individuals who have niche skills or are experts in their field. Additionally, scalable companies benefit from individuals who assume multiple roles – a jack of many trades. This has two benefits: you can maintain consistency and keep costs low.

Partnerships

Your company may excel in certain areas, such as email marketing, but suffer in reaching social media consumers. As a result, you may try building a partnership with a similarly sized company that requires help in areas your company excels at. As a result, you can develop a mutually beneficial relationship at a low cost by offering assistance and support services.

Both companies can engage in guest blogging, co-hosting events, endorsements, or collaborative product and service development as part of the partnership deal.

Automate

Many tedious and repetitive tasks are being taken over by AI or machine learning technology. As a result, this can be a time saver and cost-effective strategy to scale your business. For instance, HR, payroll, and social media marketing can be automated. This can free up funds that can be allocated towards hiring another expert or acquiring software, such as cloud-based servers.

Similarly, invest in technology and software that can optimize workflow and efficiency. For instance, rather than manual consumer organization processes, your company can effectively scale by incorporating customer relationship management (CRM) software. CRM software automatically organizes notes, activities, and metrics pertaining to consumers. Additionally, the platform allows easy, real-time access to employees from various departments, enhancing collaboration and customer service.

Outsource

If your company doesn’t have in-house specialists or if obtaining one cuts too deeply into your profit margins, you can consider outsourcing the job. Currently, 59% of businesses outsource to cut costs. Notably, many businesses utilize personnel from abroad for IT support services. This can help keep expenses steadily low, as well as help you funnel funds to in-house operations that are imperative to continue scaling processes.

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Although scaling aims to improve operations while keeping costs low, your company may need to invest in software or personnel to keep up with demand. The key is to make sure you are not overspending in these instances.

If you’re looking for a small boost in capital, you may consider obtaining a microloan. Although this type of funding has higher eligibility requirements, the rates are relatively low. As a result, this may safeguard your business from significantly increasing expenses and failing to scale successfully. Approved businesses may receive up to $50,000, and the funds can be used to purchase equipment, inventory, or supplies.

Research

Although it’s important to be unique in your branding, services, and product offerings, that doesn’t mean you can’t utilize scaling strategies that have worked for other companies. Study your competition and determine what systems or processes they incorporated when scaling. Often, it is best to follow tried and true methods of growth rather than reinventing the wheel. This can ultimately increase efficiency, save time, and, most importantly, money.

Sum Up

Scaling is the process of enhancing and expanding business operations to keep up with higher market demand. However, these improvements mustn't be made at the expense of higher spending or diminished quality and service.

To help your business live up to increased market and consumer demand, you’ll likely want to start with hiring experts in scaling. Additionally, you’ll surround yourself with experienced personnel who have the technology and tools to efficiently implement scaling strategies. Finally, don’t be afraid to take a few cues from companies that have scaled in your sector. They likely have insight that you can utilize as a blueprint. 

Mike Abelson   Editorial Director
Mike is the Editorial Director at Lendza. He enjoys helping entrepreneurs and startups succeed through smart, innovative strategies. He’s partnered with CEOs and executives to grow businesses from the ground up. Before his work at Lendza, Mike was a stock market analyst. When he’s not traveling for work, he enjoys reading adventure and science fiction novels.