1. The business is scalable means that your business has the potential to multiply revenue with minimal incremental cost. Ready to scale is when you have a proven product and a proven business model, about to expand to new geographies and markets.
2. Most consulting services, like marketing, are not scalable, since they must be delivered by experts, and cloning experts is slow and expensive. Investors don’t invest in services startups.
3. Investors like ideas based on market research from outside experts, like Gartner Research, proclaiming a billion dollar opportunity with a double digit growth rate. These are more likely scalable and investable.
4. It’s hard to build and scale a business on free high-support products. Scalable businesses have high margins (over 50%), low support, and minimum staffs.
5. No product, even with a large opportunity, is ready to scale until you can show it working, with multiple customers paying the full price, to validate the business model. Count on multiple pivots with real customers, before you get it right, before you ask for investor money to scale.
6. If you are still spending most of your time working “in” your business, rather than “on” your business, then you are not yet ready to scale. Show that you have and can continue to hire the right people to run the scaled business without you being everywhere and making every decision.
7. Great business models depend on developing three "green lights," or qualities that help the business succeed: finding high-value customers, offering significant value to customers, and delivering significant margins. Great business models also avoid three "red lights" that can derail a business: difficulties in satisfying customers, trouble maintaining market position, and problems generating funding for growth.
8.
Tips:
- If you need investors, start with a scalable idea.
- Build a business plan and model that is attractive to investors.
- Use a minimum viable product (MVP) to validate the model.
- Build a strong team to take yourself out of the critical path.
- Outsource what is non-strategic to optimize leverage.
- Focus on marketing and indirect channels to get the message out quickly.
- Automate to the max
- Attract and relish investor funding.
- Consider all possibilities for licensing and franchising.
- Define a business that is open-ended and continuously improving.
References:
http://www.forbes.com/sites/martinzwilling/2013/09/06/10-tips-for-building-the-most-scalable-startup/
http://www.entrepreneur.com/article/176530
http://www.marsdd.com/mars-library/business-model-design/
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