Scalable

Definition

The ability to quickly grow a company without requiring a proportional additional investment in the business to support the growth.

Example

Uber and Airbnb are highly scalable businesses. Software is lso highly scalable. Once software is created, millions of software licenses can be sold without requiring a large additional investment (equipment, employees, buildings, etc.) in the business. By contrast, Starbucks (the retail segment) is not a scalable model. To grow starbucks 10 times would require a 10 time investment in hard assets, whereas to grow a softwre company 10 times might only require a two time investment.

  • Scalable Company: Growing revenues from $10 million to $100 million requires a $1 million investment in additional resources (equipment, employees, etc.).

  • Non-Scalable Company: Growing revenues from $10 million to $100 million requires a $10 million investment in additional resources (equipment, employees, etc.).