What is scalability and why do you need it…

Author:  Leanne Knowles

Date: November 2020

Introduction to scaling your business

Growing a business can feel like a merry go round of hard work sometimes, with the occasional win here and there to give cause for celebration, and to keep you motivated.  You love your customers and your team, but sometimes you feel like you want to step off that merry go round, and break free of the daily demands.  Not to mention all those great ideas you still haven’t found the time to develop or create.

I get it!

Scalability could be the answer you’ve been looking for.  In fact, it’s an essential element for sustainable growth and profitability for any business owner who wants to avoid being stuck inside the operations of their business.

I often get questions about whether scaling a business is going to increase their workload and require a big bucket of cash.

The good news is that it can be done ONE STEP AT A TIME, so you can create that time and money freedom that has seemed so elusive, without the overwhelm of taking on a massive business transformation all in one bite.

What is Scalability?

Scalability describes the ability of a system, software or organization to grow and manage increasing demand in a streamlined manner, without disruption.

Examples of revenue models that make it easier for you to scale include:

1. Franchise businesses
2. Online Training
3. Digital Publishing - Subscriptions
4. Digital Memberships
5. Digital Service Retainers
6. eCommerce – new market expansion of existing products, and product line expansion for existing markets
7. Software as a Service (Saas)

Why Do You Need Scale?

Scale is different to growth, and they go hand in hand. 

Scalability means that as your business grows and takes on more customers, staff members and business activities, your sales, marketing and delivery systems can keep growing without bursting at the seams, running out of cash, or descending into relative chaos. 

This is essential both for the customer experience, and for the reputation and ongoing viability of your business.

It also means that the costs of running your systems are more likely to decrease, as the orders, customers and revenue increases.  This in turn generates sustainable profitability and increases the value of your business.

Savvy investors and potential business buyers are increasingly looking for scalability as an essential criteria in their checklist.

Without effective scalability in the key areas of your business, you are destined to stay stuck inside the daily demands of your business, and growth will be more difficult than it needs to be.  Its very likely that more nimble competition will out-innovate you and slowly (or not so slowly) chip away at your customer base.  Quite simply, your business will get left behind in this fast moving trend towards digital services.

How to Scale A Service Business

Setting your business up for scalability need not be complex.  Here are my three favourite shortcuts to creating the scalability you need, without the stress and overwhelm.

1. Strategic Partnerships
2. Business Tech Stacks
3. Recurring Revenue

Strategic Partnerships

What is a strategic partnership?

As you grow, you’re not only going to need more hands on deck, but you’re also going to need a whole new set of skills and experience to handle the changed environment.

Strategic Partnerships enable the fast addition of more people - and people with different skills and experience, without breaking the budget or running out of cash.

Why do you need strategic partnership?

Business owners often inhibit the growth of their business unnecessarily, because they believe they don’t have the people, skills, cashflow and resources they need.

The purpose of these partnerships is to enable the sharing of resources to promote faster growth for all partners – while adding new value for your customers.

Effective collaborations can provide you with everything you need, and assist you to scale more easily, with lower risk, and fewer internal resources.

Without Strategic Partnerships, it's true that you'll need the cashflow and budget to fund a growing team of people in-house, or even contract staff. This is a risky proposition, because you'll need to accurately anticipate your future needs, and potentially add a huge additional overhead to your business, at a time when you need to be flexible.  You'll also need to train and induct all these new people.

This risk is further compounded potentially by the challenge of finding new employees to fit your needs, at the time that you need them.

How to set up a strategic partnership

A successful Strategic Partnership starts with a needs analysis inside your own business that guides decision making.

The 5 key questions you’ll need to answer first…

1. What are your goals, and what do you need to get there?
2. What’s missing from your existing capabilities?
3. What other business could provide you with what you need - and who also shares your cultural and brand values?
4. What do you have to offer that would be of value to them?
5. How will you prepare your pitch to them? Who, what, when?

Once you find your new Strategic Partners, invest some time discussing in detail how things will work between you and create a simple agreement.

Prepare your team well, and do the planning, so you can enjoy real success.

Your digital system

What is a scalable digital system?

Your scalable digital system describes the set of software platforms that you have chosen for each function in your business, how scalable they are and how well they’re integrated with each other.

Examples of your Business Tech Stacks would be applied for each department:

1. Finance and administration
2. Product or service development
3. Marketing
4. Sales
5. Delivery and logistics

Why does your technology need to scale?

Getting your Business Tech Stack right will create the foundations for success in today’s fast-moving market environment, and enable scale at whatever pace you need.

A scalable Tech Stack allows you to start small and grow your investment incrementally as revenue grows, without requiring huge upfront investment that puts your business under pressure. 

It also allows you the flexibility to ramp up capacity quickly and reduce capacity in the event of unexpected changes in the external environment.

A scalable digital system can be viewed in two parts

1. Each platform or piece of technology must have the capacity to scale up as you grow, or scale down as you need it
2. Each platform must also integrate with the other pieces in the same situations

Without scalable technology, you and your business could be in all sorts of pain as you start to grow beyond the needs of your existing systems.  Assumptions, promises and expectations go out the window, as the higher level of demand begins to strain the reliability of delivery and the quality and consistency of service.

If you get to this place, you could find yourself scrambling to band-aid the situation and it can be extremely difficult to turn it around without severely damaging customer relationships and trust.

How to scale your digital system

Getting your Business Tech Stack right the first time requires a strategic approach. Here’s 5 simple steps to get you on the right path.

1. Review your business strategy and discuss what the future looks like
2. Talk to your staff and your technology provider about what you’ll need
3. List your functionality requirements – ‘must-haves’, ‘nice-to-have’
4. List the other platforms in your business that a new system will need to integrate with
5. Prioritize the most urgent and impactful investment – with measurable goals, a budget and a timeline

Only once this internal review is complete, should you then start reviewing the digital solutions available on the market.  You’ll be amazed how much easier it is to find what you need and to make the right decision with confidence.

Recurring revenue

What is recurring revenue?

Recurring Revenue is a systemised method of earning business income that is reliable, consistent and regular. With today’s technology, it’s easy to automate, and is a highly valued revenue model.

What recurring revenue is not…

It is an unnecessary stretch to consider traditional repeat business as recurring revenue.  It simply does not provide the level of certainty and predictability provided by the new revenue models opening up for all businesses.

Examples of recurring revenue include:

1. Content subscriptions
2. Digital service retainer
3. Software as a Service (SaaS)
4. Affiliate sales for other SaaS products
5. Evergreen online courses or events periodically delivered as memberships
6. Combination of online membership with physical product delivery
7. Digital advertising

Why do you need recurring revenue?

Recurring revenue delivers enormous benefits for both your business and for your customers.  When you combine a recurring revenue model with an irresistible offer to your ideal customer group, the outcome is stronger, more consistent cashflow, increased productivity, and more sustainable long term profitability.

When your recurring revenue is derived from a mostly automated digital service, your customers experience a higher level of value, and an increased level of consistency and quality of service - when you have designed it to do so.

In addition, market expansion becomes easier, because the recurring nature of the model allows for leverage through your strategic partners in promotion and delivery.

With it, your time as a business owner can be freed up to focus on the big picture as you grow your business with less stress. Planning for growth, innovation and continuous improvement becomes easier.  

Without recurring revenue, lumpy cashflow quite possibly remains a frustrating aspect of the traditional service revenue model.  Scale and growth is potentially inhibited, and life in business does not deliver the kinds of returns that are now possible.

What Kind of Businesses Can Scale With These Strategies?

What kind of businesses can use these strategies?  Almost all businesses can reorganise their approach to create new recurring revenue streams.

How to take the next step to scale your business for growth and profitability

If you run a business in B2B or professional services, and you want to grow and scale your business for long term, sustainable profitability, creating a new digital revenue model is the way to go.

Here’s 5 simple steps to get you started…

1. Review the opportunities inside your business
2. Do you have skills or knowledge you can record in a digital format?
3. Are there customer frustrations and challenges you are not yet addressing?
4. Can you bundle services and projects with coaching or online courses?
5. Create an irresistible offer that makes your competition irrelevant
6. Adapt your systems for upgraded billing and service capabilities
7. Automate your marketing and sales activities where possible
8. Ramp up your customer onboarding with videos and automated email sequences

My recurring revenue checklist

In the meantime, here’s My Recurring Revenue Checklist that I have used in my own business to help me build out my digital services strategy.  It’s yours for free and it’s an easy download, so just click on the link below and you’re on your way to the next step.

Yes! Give Me My Recurring Revenue Checklist.