Why Scale is Important
Across the multiple startups and businesses that I have run over time, I have come to a firm conclusion that scale is an extremely important element for the sustenance and success of an organisation.
And yet, many small businesses and startups, do NOT scale. And I have heard a lot of reasons, some of which may actually be well-disguised alibis, justifying why they don't want to scale! From "I want to remain my own boss, so don't want to get investors in" to "I like my niche space, so what if it makes this a small business" or even "I am happy where I am, I am able to run my home, and take a decent profit every year - what else do I need?!".
From having been an early stage entrepreneur multiple times and also having run a small business, as also having interacted with many other founders of this kind, I realise that most of the time, the above-mentioned kind of "reasons" are alibis! Either for not being able to scale, or for the fear of the unknown (like "swimming in your small pond versus venturing out into the ocean"), or some other reasons of the kind. Very rarely is there true and valid justification for staying small.
Irrespective of the reasons, I would like to make a case for why scale is important in business.
Scale gives you the hedge against occasional failure. Yes, somethings can and will go wrong. At scale, you are able to weather such a storm.
Scale gives you an ability to experiment. When you invest into some new idea, it should not take you down. With scale, you are able to handle such experiments.
Scale gives you an opportunity to invest into R&D. And most businesses need to work on their future, and R&D is needed for that. With scale, you are able to do so.
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Scale gives you a certain bargaining clout. A business of size can speak to vendors and other partners, with more command than a smaller business. You can negotiate better terms, because of that.
Scale reduces your vulnerability. Whether it is due to a sudden crisis, whether it is due to cash flow problems, or other such reasons. With scale on your side, you can survive.
Scale enables you to attract better talent. A good talent may not want to risk their career in an organisation that appears to be small and vulnerable. Size gives a higher level of confidence.
Yes, scale is very important to ensure sustenance and longevity, even when being smaller might give you a comfort of "being in better control of things"!
A few related points in the context:
Scale make a big difference to organisation success and longevity. Cheers to all of you working to achieve scale in your business!
Global Board Member, Angel Investor, Author 10X Mindset, 10X Paradigm, 10X Execution, My God is an Atheist, Act or Accept, ???? ??????? ?????
3 年Every business has scale threshold that decides its survival. Moreover, threshold is dynamic.
Consultant-Global Biz,Stock & Crypto Market Enthusiast,writer..
3 年Well pointed out Sanjay?? In case of India,the obstruction 2 successful scalings are.. Due importance is not given to RnD in Government & Pvt.sectors. GDP on it is hanging @ 0.7 % for long time! Glbal Innovation Index- Rank 48/131 countries (2021),much can be improved in terms of patents, trademarks, industrial designs. Indian mindset of "thoda hai thode ki jaroorat hai" has lot to do with lack of adaptability and eagerness for scaling. Hire & fire mentality of owners to get their job done on adhoc basis instead of planning and thinking big for long term... Over dependency on internal scaling,lack of proper mindset and people can stop the company for taking external support for growth. Other external factors like taxation,red tape, industry specific struggle can also matter...
Education reform professional
3 年Can I share this on the USC India LinkedIn page? Very well written and argued.
Director - Tech. & MARCOMM at Radical Management Services
3 年Thoughtful and insightful for startup entrepreneurs..!!!