In our latest installment of our, Ready for what comes next series? we’re talking about, What Makes a Business Scalable?
Growing a business and making it scalable are not the same thing. One adds sales. The other builds the capacity to handle them without adding the same amount of complexity, cost or pressure on the people at the top.
The order book is full. Revenue is up on last year and the pipeline looks healthy. By most measures, the business is doing well.
Yet it feels harder than it used to. Decisions queue up for the same two or three people. Month-end takes longer. Another hire goes in to keep pace with the work and then another. Everyone is busy but the business is no easier to run than it was when it was half the size.
If that sounds familiar, you are in good company. It is one of the most common experiences in successful, growing businesses and it points to a distinction that is easy to miss: growing is not the same as being scalable. So read on to discover, what makes a business scalable? And practical ways you can make sure your business does not fall into the traps of your scaling competitors.
Growth adds sales. Scalability adds capacity.
Growth is about more: more customers, more revenue, more people, more sites. Scalability is about what happens to the business when more arrives.
A scalable business can take on additional activity without complexity, cost and effort rising at the same rate and without the owner or a handful of key people having to absorb the difference. Processes, decision-making, management capability, information and systems all do their share of the work.
Here is a simple test. If sales rose by a quarter over the next year, what else would have to grow with them? If the honest answer is more headcount, more management time, more chasing, more workarounds and more of the managing director’s diary, then the business can certainly grow but it is growing by effort rather than by design.
What makes a business scalable? Why it’s hard to avoid these challenges
Most businesses get to where they are through exactly that effort. Capable people compensate for gaps in process. Informal arrangements stand in for systems. The owner’s knowledge holds things together. At a smaller size this works, often brilliantly and it is part of why the business succeeded in the first place.
The difficulty is that these arrangements do not stretch indefinitely. What is manageable at one size becomes strain at the next and the strain is often put down to people rather than to the way the business is set up. Good people have not suddenly become less effective. The business has simply outgrown the arrangements that used to carry it.
At Alcea we have discovered that this situation is one of the key reasons we are brought in to a business – to help them fix the operational frictions that have grown as the business has scaled. Here are the five foundations of a scalable business we have identified in our work.
What makes a business scalable? Five foundations of a scalable business
Scalability is not a single feature. It comes from five things working together.
- Processes that do not depend on who is doing the work. Core activities run in a consistent, understood way. New people can get up to speed without relying on one colleague’s memory and quality does not vary from person to person.
- Decision-making that sits at the right level. Routine decisions are made close to the work, within clear limits, so the owner and leadership team are kept for the decisions that genuinely need them. When everything needs sign-off from the top, every increase in activity becomes a longer queue.
- Management capability. Managers need the authority, skills and confidence to run their areas, set priorities and develop their teams. This is not a soft extra. The Office for National Statistics’ Management and Expectations Survey measures structured management practices such as continuous improvement, use of performance indicators, target setting and how people are developed and finds them associated with higher productivity. Its 2023 results also show where the gap sits: use of key performance indicators was the weakest of the four areas measured, averaging 0.42 on a scale from 0 to 1.
- Information that is reliable and easy to reach. Leaders can see what is happening without asking around or waiting for someone to build a spreadsheet. The same ONS survey found that firms with below-median management scores were four times more likely to use little or no analysis to support important business decisions. Scalable businesses steer by evidence rather than by instinct alone.
- Systems that work together. Technology should support the way work flows rather than add to it: data entered once, shared across functions, with less manual re-keying and reconciling. It is also only as scalable as the process it supports. Automating a poor process mostly helps it go wrong faster, which is why technology, including AI, earns its place after the fundamentals not instead of them.
What makes a business scalable? In practice: from interest to decisions
Decision-making is often where scalability is won or lost and it does not only apply to routine matters. A UK energy infrastructure business of around 100 staff recently faced a new issue its leaders knew mattered, the implications of AI for operations, risk and governance but had no agreed way, as a Board, to decide what to do about it. Interest was high. Direction was not.
We facilitated a three-hour leadership session that gave the Board a shared understanding and room for constructive challenge and ended with agreed priorities: AI governance, leadership capability and staff development. The effects followed quickly. An AI use policy, with guidance on approved tools and data handling, was issued within weeks. The CFO sought role-specific training to understand the implications for financial oversight. Staff training became a priority, leading to an all-company briefing.
What the business gained was a clearer way of turning a new question into decisions, owners and action, which is what a growing business needs more of.
Why scalability matters beyond the day-to-day
Anyone who has to judge a business from the outside looks for these qualities. Buzzacott, writing about preparing a company for sale, reports that buyers place significant emphasis on the strength and maturity of operational infrastructure. They want to see capable management and operational teams without over-reliance on any one individual and they tend to favour businesses whose processes and technology can be integrated without major disruption. These are the firm’s observations from the transactions it has worked on, rather than survey data but they match what we see.
The qualities that make a business more attractive to a buyer, an investor or a lender are the same ones that make it easier and less stressful to run today. You do not need to be planning an exit to benefit from them.
Grown or scalable? How to tell the difference
Two businesses can show the same revenue chart and be in very different positions. This is how they tend to differ.
| A business that has grown | A business that has become more scalable | |
| When sales increase | Workload, headcount and overheads rise in step with them | Activity rises faster than complexity and cost |
| Processes | Work is done differently depending on who does it | Core work follows consistent, understood ways of working |
| Decisions | Escalate to the owner or a few senior people | Made at the right level, within clear limits |
| Managers | Busy firefighting and covering for gaps | Equipped and trusted to run their own areas |
| Information | Lives in people’s heads, inboxes and spreadsheets | Reliable, easy to reach and used to steer the business |
| Systems | Separate tools, bridged by manual workarounds | Connected tools, with data entered once |
| The owner | Still central to the day-to-day running | Free to focus on direction and the next stage |
Where to start making your business scalable
You do not need to rebuild the business to make it more scalable and trying to fix everything at once rarely works. Scalability is built one constraint at a time. Five questions can help you find the first one.
- Ask the doubling question. If volume increased sharply, where would it land first: which team, which process, which person?
- Follow the effort. Where do people spend time on rework, chasing, checking and re-entering information? That effort is usually capacity locked up in the way work is done.
- Look at who decides. List the decisions that routinely come to you or the leadership team. How many could be made elsewhere, given clearer limits and better information?
- Strengthen the middle. Are your managers equipped, trained and trusted to carry more responsibility as the business grows?
- Fix before you automate. Settle how the work should flow before investing in systems, so that technology strengthens a good process rather than a poor one.
None of this is a reason to hold back growth. The aim is to make sure each stage of growth leaves the business stronger and not just larger.
Ready for what comes next?
If you would like to talk through where your business may be carrying more weight than it needs to, we would be glad to have a conversation. There is no obligation and no pitch. Visit alceaconsulting.com to find out more or to get in touch.