How to Design a Scalable Business
Did you know the scalability of a business not only makes a business more enjoyable to own, but also increases the market value of a business?Scalability is an important topic that many business owners don't take the time to consider. When a business is not scalable it hits its capacity and plateaus. However, a scalable business is able to grow significantly, handle increased demand, and generate consistent revenue with lower costs.
So how do you design a scalable business that can thrive and grow without reaching capacity? According to John Warrillow, and in his book Built to Sell, a scalable business has a valuable product or service that is teachable to employees and creates repeatable purchases from current customers. He calls this the Scalability Trifecta.
Trifecta 1 - Valuable Product/Service
A valuable product/service is one that stands out in the eyes of the customer. When prospects see your business as more desirable than the competition, you create demand for your business. With this kind of differentiation, you can grow in different markets, larger geographical areas or even gain more of your current market share. The potential for this growth makes your business more scalable and valuable to future buyers.
Insight - There are many creative ways to distinguish your product/services so they are not seen as a commodity. For example, if you have a product that can be purchased at several competitors, you could add a unique service to the product as a differentiator. Alternatively, you could bundle several services together into one product that makes the bundle unique.
Trifecta 2 - Teachable to Employees
If your products/services are not easily teachable, the person with the expertise, often the owner or key employee, becomes a bottleneck. The business cannot grow beyond what that person can produce/oversee in the finite amount of time they have. Having products/services that are hard to teach also creates a barrier in hiring and training new employees if demand increases quickly. Imagine having the opportunity to double your revenue. Would you be able to train employees quickly to take on that opportunity? When a product or service is easy to teach the business becomes scalable, as growth is not limited to the owner or key employees.
Insight - Look to design systems and training programs that allow your products/services to become more teachable.
Trifecta 3 - Repeat Purchases from Customers
If your products/services do not create repeat purchases from customers, your business will spend a lot of time, money, and energy generating new customers. A more valuable and scalable business is one that has customers purchasing on a consistent basis.
Insight - Look for ways to create recurring revenue from existing clients with your products and services. This could be subscriptions on services in the future, contracts for a certain amount of time, or consumable products that need to be replaced, to name a few.
Consider the Scalability Trifecta and how you could increase the scalability of your business. When you increase the scalability of your business, you will notice the freedom it brings you today; and also the many options it brings when you are ready to exit your business.