|round and round we go - polarity locket|
And since our businesses are living, breathing entities (not in a businesses are people kind of way, of course) that evolve and grow maybe this is something we can look at now with fresh eyes.
You have probably heard that you might be able to increase profits by making your business scalable (or that you do not really have a business if it isn't scalable) and maybe
you are kind of picturing yourself climbing a mountain or maybe being carried up a mountain on the shoulders of a hardy sherpa.
(which is probably the only way I could climb a mountain right now - NOTE TO SELF - put the inflatable bed away, the guests have been gone for a month and pull the elliptical machine back out, oh and actually get your ass on there Cat).
When I was in banking being able to scale a business just meant the business was efficient enough to be able to grow and work just as well in a large 'scale' situation - when a business model or design failed with a quantity increase we said the business will not scale - so no loan for you good buddy, see you later, have a nice day.
Today more commonly when someone talks about scaling our business they mean we add more business (the ka-ching part) without adding more work or increasing our (proportional) costs - our business becomes more and more profitable without us expending more and more energy (energy = money or time).
Scalability refers to the ability of a site to increase in size as demand warrants. Businesses are extremely scalable if the costs to operate the business are relatively fixed and more customers do not significantly increase our costs but they do significantly increase our profits. This is the perfect business model but doesn't work for everything.
It might be easier to picture what scalability is with an example of what scalability isn't.
(and usually the best way to learn anything from my blog is to read what I have done and then go ahead and just do the opposite)
I used to sell from seasonal mall carts.
This was in the days when people still did most of their shopping there. I started with one cart (see my story about that first season from hell here) and worked it myself six days a week, insanely long hours as the holidays got closer, and then had my brother and his friend work on Sundays.
It was totally exhausting, but a short enough season that I somehow managed to survive and lived to do it again.
That first year I grossed X amount of dollars. Let's say the X was $100,000 - it was probably not that much but this number will be easier to work with. Now because I sold something for $20.00 that cost me $5.00 to make which is about the minimal kind of mark-up you needed for a mall cart in those days - so it was something like $100,000 gross minus $25,000 product, $10,000 rent, $10,000 start up costs, $2000 salaries and $3,000 out the window who knows where costs, let's say I made about $50,000 (before Uncle Sam took his cut).
The next year I became one of those 'go big or go home' kind of girls and rented two mall carts.
And because I am the kind of compulsive thinker who thinks 36.5 steps ahead and because these two malls were an hour away from each other I hired enough people to cover both carts all the time (I think I hired 12 people) so that I was never scheduled to work and would be available to race to a cart if someone didn't show up for work or something went wrong or we just got swamped somewhere, any one of which I saw as a high probability.
Anyhoo, to cut to the chase. The second year I did not work quite as physically hard but mentally I had more stress and worked harder - more people to manage, more situations to manage, more inventory to manage, yada yada.
The second year my numbers looked totally different but because of the salaries I paid people (and when you pay people salaries you also pay half their social security and FICA and need a little thing, which is not such a little thing, called workmen's compensation insurance) and some inventory miscalculations, I ended up netting almost exactly what I had netted the first year.
Almost to the penny is the way I remember it.
Now, I did expand my business - I almost doubled my sales and my customer base, but I also showed myself it wasn't a very scalable business model. I slept through most of January.
I thought about scale the 3rd year (although I didn't actually think the word 'scale', I thought the word 'exhausted') when I planned for 3 carts and a manager to run them, but life twisted on me again - my mother's illness worsened and she moved in with us. I did one cart and hired some help. I have never really been a "go big or go home" kind of girl anyway - I was always more of a stay small and nimble kind of girl.
(except I have never been either small or nimble, but this is kind of how I see myself, go figure).
Today, we are mostly selling online which is great for scale because we can potentially reach more people without outlaying more energy (time, money) but we are also selling things we make by hand which is not so great for scale because usually we can only make so much.
Scalable is definitely possible for us, too, (it will likely require help, most good things do, we didn't come to this planet with 6 billion other people to go it alone, folks) although if we have not set ourselves up this way, it will be some work for us to get this scale thing going. And a product based business will probably never be highly scalable, but there are things we can do to increase profits without increasing energy (time or money) expended.
Later this week - part II - So how do I get to be spidey-woman and still make stuff
|let's get our daughters into this scalability thing early girls|