What is Scalability for Small Teams: Startup Guide
Sep 13, 202210 min read
Co-founder and CEO of Ideamotive. Entrepreneur, mentor and startup advisor.
Scalability is an important term in the business world that refers to the ability of a company or team to adapt to expansion or growth. This is a useful concept for any small business owner, CTO, or team leader. If you're curious about the impact scalability has on your workplace, you need to understand the role it plays in a company's success.
In this article, we'll define what scalability is, discuss why it's important, and look at some steps a company can take to improve its scalability.
What is scalability?
First, let’s figure out what scalability is. The term scalability refers to how well something can successfully adapt to change over time. The word is often used in the business environment to refer to a company or team that is able to adapt to an expansion or increase in responsibility. Within the company, several different specific areas show its scalability.
If a company grows significantly in a short time, it will need to adapt things like administrative processes, distribution channels, training protocols, and manufacturing equipment. If a team takes on a new project in the workplace, they may need to adapt to new management, revised budgets, or accelerated deadlines. If a company or team is able to effectively and successfully adapt to a new situation, they demonstrate sufficient scalability.
Why learn what scalability is
While expanding a company, entrepreneurs often make the following mistakes:
Having no idea of what scalability is. Many businessmen are sure that scaling is just hiring more employees. Also, there are those who confuse it with web scalability for startup engineers. Poor knowledge of what scalability is may greatly decrease your results.
Choosing the wrong strategy. For example, in order to save money, a firm hires rookie developers instead of seasoned ones. As a result, the quality of products, the customers' flow, and sales decrease.
False start. A CTO decided to scale a design team too early: at the first point, all processes have not yet been debugged, and the profit is unstable.
Lack of a well-thought-out business plan. Before publishing openings, the management didn’t take into account all expenses and didn’t prepare the budget for new employees.
Why is scalability important?
Since now you can answer what scalability is, then let’s see how crucial it may be for a particular case.
In the business world, circumstances are constantly changing. The economy rises and falls, market demands change, and customer needs change. To continue producing profitable products or services, companies must be able to adapt to these changes and implement new strategies to accommodate them. Scalable teams remain competitive even when the market requires them to adjust their goals or practices.
Companies with scalability are attractive to customers. Companies need to handle customer data and requests efficiently, even if their customer base suddenly grows. If a company can continue to provide quality software and customer service as it grows, it will earn a reputation as a scalable and reliable firm.
Corporations with good scalability also attract potential shareholders and investors. They are safe investments because they are able to succeed despite difficult obstacles and increased demands. Teams that scale are also more likely to be financially sustainable. If an executive team consistently makes future-oriented decisions, it is more likely to be adequately prepared for unexpected financial hurdles.
Benefits your startup gets
Competent expansion of the dev team provides:
The ability to take on more valuable clients. By having a better team (in all aspects), you can make bids for a greater number of clients served.
Profit growth. By creating even one additional opening, the owner receives more income if the business is successful, and scaling has led to cost savings and increased sales.
Brand awareness, and popularity across the city, region, country, or even the world.
Reduced production costs. With an optimized workflow, and having enough employees, your current ones won’t overwork, which will lead to a cost reduction.
The interest of investors in a business that is successfully developing.
How do you know when it's time to scale?
Many entrepreneurs misinterpret a one-time upswing or success as a signal to scale. As a result, their business and financial capabilities do not cope with the tasks set, which leads to the sale of their business or even bankruptcy. How to correctly determine the moment when it's time to scale?
It is important to understand that scaling is suitable for long-term projects. The seasonal surge in hired Ruby on Rails developers should not be taken as a reason to conquer new markets. After a short period of time, the promoted service will cease to be relevant and the extension will become meaningless.
So, having just opened a firm providing Java developers, it is too early to think about expanding it. You have to make a lot of efforts to attract new visitors with your services and start making a profit. At the same time, you should constantly monitor the quality of delivered software so as not to lose customers. With a well-defined strategy and a reliable team, it is possible to gradually increase the range of products, thereby expanding the target audience, and satisfying the needs of more people.
The signal for scaling will be the moment when demand consistently exceeds supply. This should not be a one-time occurrence, but an ongoing problem. When clients from all districts of the city begin to come to your React developers, they will place pre-orders. Hence, there will be no opportunity to satisfy the needs of everyone physically. Then you need to seriously think about scaling.
A small startup created by a group of UX/UI designers can decide on its own how many customers to serve and when to look for new ones.
How to prepare to scale your business
At the heart of the successful expansion of the company is planning, taking into account immediate and global goals. Among the primary tasks is increasing brand awareness so that more customers appear before the business scales.
The SWOT matrix helps to determine whether the company has the resources to scale:
Strengths - advantages;
Weaknesses - shortcomings, flaws;
Opportunities - possibilities;
Threats - risks.
It is used to analyze whether there are grounds and opportunities for scaling. Consider the SWOT matrix using the example of a company providing React Native developer services. The following table will also give you a brighter understanding of what scalability is.
Increasing demand for services.
Overcome the next door company.
Rising prices for utilities.
Due to declining incomes, customers may switch to cheaper services from a nearby firm.
Produce cost-effective product options while maintaining optimal quality.
Online sales of services are poorly organized: social networks are maintained irregularly, managers miss applications.
Advertising campaigns are rarely carried out.
Hire a manager to maintain pages in social networks and process applications.
Create a landing page and launch an advertising campaign.
Develop a marketing strategy, hold promotions, discounts.
If the analysis shows that there are reserves for expanding activities, creating a plan for any scalable business ideas is necessary. This will require:
Analyze the market and the advantages of competitors in order to determine how to attract the attention of the target audience, and how to stand out.
Record all achievable goals and rank them in order of importance.
Consider all aspects of the "technical" side of the business plan - budget, accounting, software for managing and communicating with employees, supply chains, storage of raw materials, production of goods, marketing, and advertising.
Find the missing staff and formulate an action plan for the team as a whole and for each employee.
Automation lends itself to:
accounting for consumables and the number of finished products,
the formation and maintenance of a customer base,
the formation of invoices and reports.
This solution saves businesses time and money. There is an opportunity to optimize the staff or release employees to perform other duties.
A large team can benefit from the creation or improvement of the existing work platform. Thanks to it, employees have access to data, the ability to quickly generate and send reports, and conduct analytics.
It is convenient to coordinate the actions of different departments if you draw up and implement clear work plans for managers. The employees' work is simplified by detailed instructions for performing current duties and overcoming force majeure situations.
How to achieve scalability?
To achieve scalability, companies must be forward-thinking, adaptable, and customer-focused. Here are some steps a company can take to become more scalable:
Build a foundation.
Choose a scalable business model.
Build a foundation
Before a company can seriously plan its growth, it must have a solid foundation. When a business is still relatively small or at an early stage, there are many areas that may need improvement. Fundamental departments such as administration, manufacturing, marketing, and accounting must be functional and prosperous before a company can sustain growth.
If a company has a solid foundation, it is more likely to weather unexpected setbacks or financial hardship. Prioritizing stability from the start will improve scalability for any business. Specific steps a company can take to secure its foundation include hiring highly skilled employees (for example, several Flutter coders), acquiring efficient process equipment, and automating key tasks.
Choose a scalable business model
When a project is just starting out, some business owners may prioritize quick fixes over long-term scalable solutions. Narrow thinking is one of the most reliable ways to limit a company's scalability. Eliminating the symptom of a problem may solve the problem for the time being, but identifying the source of the problem will have a positive impact on the future of the company.
Investing in more expensive and time-consuming solutions to problems helps prepare the company for future growth and can save the business owner money in the long run. Companies that learn from past mistakes also show increased scalability. If a company's executive team is able to constantly review and update the business model to accommodate changes in the market, the company is more likely to succeed.
How to choose a business scaling strategy
Horizontal strategy is copying the current business model: opening a new office or branch. The strategy is suitable if the company has a proven scheme of work that consistently makes a profit.
The vertical strategy has two directions:
"to the supplier" - the transition from the purchase of goods and materials from an intermediary to work with the manufacturer; it is more profitable to buy products at the factory than from distributors;
"to the client" - to offer customers related products and services; when selling plumbing, provide its installation.
Strategic planning is an integral part of increasing the scalability of a company. At the heart of strategic planning is the adoption of a good idea and the search for the most efficient and effective method to bring it to life. Strategic planning involves setting long-term strategic goals and encouraging the entire company team to work together to achieve these goals. Achieving strategic goals focused on future growth contributes greatly to increasing scalability.
Strategic planning for scalability can involve many steps, including:
Successfully scalable companies hire employees who prioritize teamwork and collaboration. As a company grows, the roles and responsibilities of employees usually evolve or expand. If all team members are willing to support each other and offer help, these transitions can be done smoothly and stress-free.
In addition, if the business owner and managers can delegate tasks and trust their teams, the company will operate more efficiently and increase its growth potential. A company with a close-knit team of employees who believe in their mission and work hard to succeed is more likely to adapt to expansion and development.
It is essential for a business that planning for the future does not distract from the day-to-day activities of the company. Management teams that are patient and willing to take their time with decisions are more likely to contribute to the growth of a scalable company. Patient business owners know that running a business well early on is one of the best ways to prepare for and anticipate future growth.
Often the actions a business owner takes to improve scalability don't have immediate consequences. It may take months or even years before strategic planning for scalability has a positive effect. Business owners and managers who are willing to remain patient and optimistic greatly increase their chances of running a scalable company.
How to evaluate the effectiveness of scaling
When scaling a business, you should find ideas, implement them and evaluate the results. If something goes wrong, then you need to refine the idea or test another one.
Both the intermediate stages of business expansion and the final result should be analyzed. It is better to do this sometime after the introduction of the next innovation; the effect of it should be evaluated as a whole.
When scaling, there will be decisions that will not give the desired result. Just think about why it happened, draw conclusions, and move on.
Continuous development and growth are indispensable components of success. However, many aspiring entrepreneurs have little understanding of what scalability is, imagining some kind of super-complicated and very risky quest. Knowing the most common myths in this regard is necessary in order to save your own business. Convincing yourself that the scalability of the business is zero, development, and expansion are impossible means artificially restraining the existing potential.
In some industries, scalability is zero
The most prominent companies in the world started as a startup. For example, the Bosch company at the end of the 19th century was a small workshop with only one mechanic. Facebook, one of the most popular social networks, a super-successful business project, was originally organized for students of one college.
According to experts in the field of advertising, the successful expansion of the enterprise requires:
careful selection of personnel,
competent organization of work.
It takes a lot of money to scale up a business
This is one of the most common myths. Many people equate scaling with its extensive development. The second definition involves a physical increase in the volume of purchased resources in order to increase output.
Large investments are inevitable here. However, scaling does not always require significant costs. The goal is somewhat different: to sell the product to more customers at a minimum cost. An example of scaling is the creation of an online store with the possibility of wholesale and retail purchases, in addition to the existing offline points. By investing in the creation of the site and its promotion, you will reach a stable profit.
Business expansion is a panacea for all financial problems
This is a rather dangerous misconception, because if the enterprise is operating at a loss, scaling measures will not only not help solve problems, but will complicate them.
Frequent causes of problems in the field of finance are the lack of planning or a frivolous attitude towards it, as well as a misunderstanding of the payback of different types of products. For example, if you are going to scale by opening a branch or an online store, you need to be clear about the costs. Without competent analytics and financial management, the development of an enterprise is impossible, and it cannot be scaled up.
An increase in staff is mandatory for expansion
This is only partly true. For example, when creating new software, hiring some additional Python developers would work. However, the focus is not on the number of new personnel, but on their professionalism - the ability to work effectively in the new conditions. An unprofessional worker can only do harm.
Scaling is a complex process
The development strategy can be either simple or complex. The latter option is worse since it is much more convenient to work according to a simple plan with clearly defined stages on the way to the target results.
Using scaling tools wisely allows an enterprise to expand without experiencing financial hardship. The main thing is to develop an effective strategy, determine the main steps towards the goal and hire employees who would help to implement it, scale the enterprise, and achieve increased profits with relatively little cash investment.
Over to you
Having understood what scalability is, right after the first signals for scaling were tracked, an entrepreneur should conduct a SWOT analysis, choose a strategy and prepare a detailed business plan. If, at the end of the day, it turns out that scaling will be beneficial, you can proceed with the implementation, monitoring the effectiveness of each step and adjusting the movement if necessary. Under such conditions, scaling will bring the expected benefits to the business and provide an incentive for further development.
Robert is a co-founder of Ideamotive. Entrepreneur, who with passion spreads digital revolution all around the internet. Mentor and advisor at startup accelerators. Loves to learn and discover new business models.