The Scalability Factor

If there is one factor that adds a lot of oomph to your business plan, it is the famous "S" word: Scalability.

Investors across the world are hunting for the business plan that requires a one-time product development (read: one-time risktaking) and then once it works, you just replicate the product and get busy counting the dollars. Makes complete sense. For the investors.

As an entrepreneur, how does this word pan out?

At one level, the same benefit that an investor reaps is reaped by the entrepreneur - once the business scales; is extremely valuable and provides an exit and hence wealth creation for all stakeholders.

At another level, things are not that clear.

Scalable businesses are "Winner-take-all" businesses. So, you better be number 1 or 2 if you are in a scalable business. Else the returns decline exponentially with your market share to an extent that you might as well give up. Unless of course, you use this base to try a new model/market and become number 1 or 2 in another scalable business opportunity.
While the scalable business is part of a portfolio for any fund; for an entrepreneur, that is the only "play" in the portfolio! So, while accessing money is relatively easier with scalable business plans, it is equally easy to end up with nothing at the end of a few of the best years of your life! Or to put a positive spin on it: you better win if you have a scalable business. There is no prize for coming second - or having tried really hard. Tough.

Scalable business typically require a lot of money up-front. And then again some more to keep the product on the cutting-edge; to acquire new customers; to retain existing ones; to build monetisation mechanisms etc. By definition, such businesses also push-out the break-even stage due to the burn-rate required to stay ahead of the market. To recover this kind of money, you have to capture the lion's share of the market. And if you don't, refer earlier paragraph. :)
As an entprepreneur, you can only invest so much and then are committed to 1 idea. No portfolio for you.

Scalable businesses, very often, are successful because of an inflexion point in the market. When you study how some of the most successful and scalable businesses today started, it seems like they just tried something new - and before they knew it, the market responded in a fantastic manner. Right place, right time - in addition to a lot of smarts, hardwork, toil, sacrifice etc. Can any entrepreneur predict an inflexion point? Tough. Works easier if you have a portfolio of "bets" and one of them works.

But then, every entrepreneur believes that he can take on the world (competition, inflexion points, changing customer behaviour etc) - with one hand tied behind his back.

"All of this is fine - but I am different"
So, none of the points above will make a lot of impact, i guess.

And the S factor will continue to seduce all entrepreneurs. :)