SMEs and scalability – what’s the low down?

Smes And Scalability

Scalability is the inherent ability of a company, in terms of its business model or cost base, to sustain or improve its performance, profitability and efficiency when sales volume increases.

Let’s take a closer look at what makes a company scalable, how scalability is influenced and what investors typically look for when investing in an SME.

  1. What makes a company scalable?

    A company is scalable when it has a flexible system which can manage fluctuations in volume and improve adoption and efficiency levels by leveraging existing networks to acquire customers faster at a lower cost.

    In addition to systems, a company needs to have solid processes and procedures in place, a good team of people who can adapt to change, and solid financial systems.

  2. How is scalability influenced?

    Scalability is influenced by how applicable your products or services are to different markets, including the potential to expand geographically. Technology-based platforms or models usually have strong scalable features as they can accommodate large increases in volume without significantly adding to the cost base.

  3. What do investors typically look for when investing in an early-stage business?

    Few third-party South African investors invest in pure start-ups. The expectation is that the founding team will have funded the initial stages of setting up the company and getting some form of product or market fit.

    Thereafter investors look for businesses that have identified a large problem in a growing market that their company is solving in an efficient, innovative and defendable way, by a committed and complimentary team. The financial projections need to be well substantiated with credible assumptions based on traction to date in conjunction with a clearly defined execution strategy.

In summary, if you’re looking to become scalable and attract investment, make sure that your business is healthy, review your systems, optimise for efficiency and see where you can leverage your networks for growth.