One of the key elements that determines whether or not any business will be successful is the ability of the business to scale.

Scale is the ability of a business to grow by increasing revenues with little or no increase in it’s operating expenses. 

Good business ideas are ones that can be scaled.  If the business idea is one where you can produce and sell more with little or no increase to your operating expenses then it is one indication that you have a good idea.

Even if consumers like your product/service it will not succeed if it cannot scale. 

If it cannot scale, your profit margin will be very small.  Growth will be very slow without taking on debt or giving up equity to get the business financed.  This kind of business will be a huge financial risk to investors who see no growth potential in the business.

An example of a scalable business is a software company that produces a software application.  The real cost is in building the first copy.  After that unlimited additional copies can be easily made at almost no incremental cost. 

An example of a business that is not scalable would be a service company that provides management consulting services.  There is a high cost to bringing in consultants with the requisite skills in order to be able to provide the consulting service.  The more customers you take on the more consultants you need.  The cost of bringing on additinoal consultants does not go down.

A business that produces a product that has an upfront cost that drops off with future production can be scaled to provide greater profits as the business grows.

Some of the techniques you can use to scale the business includes:

Oursourcing:  Ask yourself, can you outsource and reduce cost?  Identify what aspect of the business you can outsource.  This could be the product design, development, distribution, personnel, etc.  You may only need labor someone with certain skill sets for a short period of time.  If you hire someone fulltime this could be much more costly than outsourcing it and only pay for the time you need.

Automation:  Ask what aspect of the business can be automated in order to reduce labor cost.  Labor cost is one of the largest expense to a business.  If you can automate any aspect of the business it will result in enormous savings.

Buy In Bulk:  Can your products be bought in bulk from a manufacturer who is willing to give you significant discounts in return.  Many manufacturers offer businesses the opportunity to buy in bulk in return for significant discounts.  The more you buy the larger the discount.  Hence, you gain by charging the customer more than what it cost you to buy the item from the manufacturer.