Scalability: what exactly is it and how is it measured?

Companies seek to increase their income in order to obtain greater profits, ensuring that their business grows and is solid and competitive. Traditionally, when a company’s income grows, its expenses also grow in a similar proportion, increasing its profits by volume and not by percentage.

With business scalability, companies increase their income without costs increasing in the same proportion, thus achieving a greater profit margin that guarantees faster and more solid growth.  

Índice

  1. What is scalability in a company
  2. How scalability is measured
  3. Types of scalability

What is scalability in a company

 

When we talk about the scalability of a company, we are referring to its ability to grow and increase its income while keeping its expenses under control . 

In a scalable company, income grows exponentially while expenses grow linearly, thus achieving a higher profit margin . That is, income increases faster than expenses over time. 

A scalable business adapts to the changing demands of its customers without needing to make large investments to achieve it. They are able to support demand and adapt to market changes and trends.

Startups are examples of scalable companies that seek rapid growth, considerably increasing their income, without the need for their costs to skyrocket.  

How scalability is measured

Growth over time. Business scalability, for its part, measures this growth taking into account the associated costs, with the aim of controlling them and achieving greater profitability.

To measure the scalability of a business, it is necessary to establish a comparison between income and expenses during a certain period of time . Representing both variables on a graph, income should show a geometric progression, while expenses should remain in a linear or arithmetic progression. 

Types of scalability

We can differentiate two types of scalability for companies:

  • Vertical scalability . This type of scalability focuses on the rapid growth of the business for which it provides the necessary resources and improvements in the areas or processes that have the most influence in this regard. For example, if the company generates more sales through its email marketing campaigns , focus its resources on promoting this service as a priority. 

  • Horizontal scalability . To achieve great growth in the medium and long term, keeping costs controlled depending on the pace of growth. They are flexible systems that make investments or increase expenses in a scalable way (wherever it is most useful for the growth of the company at all times). This type of scalability is ideal because its benefits are greater, although the cost and complexity of implementation is also higher.

Companies with economies of scale maintain great control over their expenses despite being focused on rapid growth in their income, prioritizing those aspects that allow them to increase sales.

Scalable businesses provide greater stability and increase the competitive level, facilitating growth in the number of clients and income, while maintaining great control over associated expenses.