“Highly scalable business models” are the four magic words to quickly hook most venture capital investors, but what does this mean?!

In essence, scalability means how easy the business is growing. Now, this raises a new question. If scalability refers to the “ease of growth” then what decides the “ease of growth”?

There are two things that need to be considered for the business to generate radical growth: the amount of capital and the type of human resources required.

1. The amount of capital that the business model needs for marketing or building infrastructure – i.e. building retail stores, a power plant or developing a website.
2. Which human resources does the business need to generate radical growth? On the one hand, simple tasks require people, who do not need to have high educational qualifications, i.e. packers in warehouses, delivery men, drivers etc. On the other hand, for complex tasks, e.g. due diligence or surgical operations, people with high educational qualifications and vast experience are required, i.e. experts.

As a rule of thumb, the lower the amount of capital and the less sophisticated the required human resources are, the more scalable a venture is. Now, how can a business implement scalable practices?

Scalability patterns

Some simple examples of scalability patterns for achieving increased returns to scale are:

• New distribution channels (e.g. change your distribution from retail to direct online sales);
• Release capacity constraints (e.g. standardize your product);
• Outsource your investments (e.g. create an external ecosystem that replaces formerly internal processes, think about Uber drivers investing in their own cars which Uber can use);
• Get your partners to work for free for you (e.g. Groupon provides the platform for businesses to create campaigns and gigs for free).

Professional investors, such as Angels and Venture Capitalists, prefer to invest in highly scalable business models. Explore with our business model tools and database new ways to operate and turn your venture into a highly scalable venture.

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