Daniel Boterhoven is a software architect and director at Viewport Tech, a software development consultancy based in Perth, Western Australia. Over the course of his career, he has coordinated countless project releases and delivered web and mobile applications for a diverse range of clients. Daniel and his team now focus on custom software development for SMBs and startups. In his spare time, he enjoys keeping up-to-date with the latest advances in the areas of software development, technology and entrepreneurship.
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Any entrepreneurial individual loves the idea of starting a business. In particular, a business that allows him or her to sit back and pursue their life’s endeavors while the money flows in. With the increasing prevalence of the internet, self-sustaining businesses that scale are becoming increasingly easier to attain. An online business that’s designed to handle more and more customers without adding to the owner’s operational workload are increasingly thriving.
So, what characteristics do these businesses have in common, and what can you do to make your online business scalable? Let’s find out.
What is a scalable online business
Investopedia defines scalability as, “a characteristic of a system, model or function that describes its capability to cope and perform under an increased or expanding workload. A system that scales well will be able to maintain or even increase its level of performance or efficiency when tested by larger operational demands.”
For an online business to be scalable, it needs to be able to keep overheads consistent as its customer-base grows.
If overheads were to increase as new customers are onboarded, business expenses in terms of money and time would increase accordingly.
As the business owner, if you have to perform a manual task when a new customer makes their way into your system, this effort will add up over time. Your days will be flooded with operational tasks, and, in the process, prevent you from being productive. On the other hand, the cost of paying someone to do this for you will be deducted from your profits.
What are the benefits
The benefits of a scalable business over their less scalable counterparts are significant:
- Decreased chances of operational roadblocks
- Lower operational costs in both time and money
- The business will be more attractive to buyers if you decide to sell
- A more seamless experience for customers
Let’s go over these in detail…
Fewer operational roadblocks
Keeping scalability at the forefront of your mind when developing your business model helps ensure that you won’t run into any operational roadblocks when you start to gain traction.
Referring back to the manual onboarding example, you should see that if business picks up quickly, the task will soon cause delays in onboarding unless more resources are brought on to handle the increased need. This can inevitably cause revenue to be lost, such as what happened to a number of cryptocurrency exchanges in the recent crypto boom.
Loosely related to the previous benefit is lower ongoing operational costs. Specifically, the cost savings gained by automating a process rather than keeping it as a manual task.
The automation of any manual task may have an initial cost involved. However, over the course of time, this cost will be recovered and your business will be left with one less task that an employee must get paid to do.
More attractive to buyers
As a buyer of a business, self-sustainability and scalability are two of the key characteristics that one will look for. No new owner wants to be bogged down learning the operational ropes once they’ve acquired a business. They will typically want to focus on the first steps in growing the business. If it is already largely automated and self-sustaining, they will be able to focus on those things that add value.
Better user experience
As in the cryptocurrency exchange example, new customers who wanted to register were met with a jarring screen explaining to them that registrations to the exchanges were closed. The web applications that made up the exchanges were not yet ready to handle the traffic load of the growing customer-bases. Also, no manual identity verification checks were set up to handle the increased demand.
The combination of these problems meant that user experience was degraded. Although the surge in new acquisitions was difficult to predict, a stronger focus on scalability from the outset could have prevented these problems.
How to make your online business scalable
There are key characteristics that constitute a scalable online business, and it is easier, by far, to incorporate these when first setting up the business, though they can still be applied retrospectively.
Automation is the most important ingredient in a business that scales. As stated earlier, to keep overheads low, it’s important to make sure that as many of the business processes as possible are automated.
Luckily, there is an increasing pool of options to choose from when implementing automation.
Services such as Zapier, Automate.io and Plainflow are making it much easier to automate online systems and interactions between web services. These services allow you to set up event chains between APIs, which means you don’t need to pay software developers to do this for you.
Utilize cloud-based hosting
Cloud-based hosting providers such as AWS, Azure and Google Cloud Services have taken hosting to the next level. These providers offer an advanced level of scalability-focused hosting options. Most importantly, they offer excellent capabilities for automatically scaling server infrastructure.
Outsource where possible
Although manual tasks are contrary to scalability, sometimes human intervention is necessary. Freelance platforms such as Upwork and Freelancer have made it easy to connect with skilled and experienced freelancers that can handle your outsourcing needs. Learning to find and vet outsourced candidates properly is a necessary skill for any entrepreneur to have.
Learn to code
The world is moving online at an ever-increasing rate. Also, the rise of the internet is accompanied by a growing demand for people who can code. Although learning to code with skill can take years, it is still one of the most valuable skills that an owner of an online business can have. Learning to code will enable you to automate tasks of your own. Better yet, it will give you a better ability to understand what can be automated and when.
By focusing on growing a product-based business, you are far more likely to attain a higher level of scalability than offering a service. Instead of spending your time working one-on-one with your customers, you will instead focus all of your attention on your product. Just think: as a service-based business grows, there will be more customers to deal with. As a product-based business grows, you will still only have your product(s) to deal with.
If you already have a service business, there are ways to make it more product-based. Defining the service as more of a set “package,” for example, will mean that customers are less likely to go overboard with customizations. You will be able to upsell from a tier of service packages. In addition, you will be able to have more financial predictability if the packages are set at a fixed price.
Feedback, metrics and transparency
As your automated product-based business grows, it is necessary to stay on top of some key indicators. Performance must be monitored, usability must be considered and feature requests must be prioritized.
- Performance issues might constitute bugs in code, or bottlenecks in server infrastructure. The cloud-hosting providers mentioned earlier all offer options for monitoring infrastructure in real-time. Also, ensuring that errors are logged in any online solution are a must.
- Using tools like Google Analytics and Heap Analytics can help with tracking user behavior in your online application. These tools can help you tackle usability issues that are degrading your customers’ user experience.
- As your customer-base grows, so will the feature requests. I’ve found that running a survey using a product like TypeForm, is a great way to help prioritize features on a larger scale.
The most important rule for keeping track of these indicators is that you should, in general, be looking at these at a high level. Although sometimes it’s necessary to drill down into what is happening for one particular user, it’s best to look at these metrics as trends. Because, over time, there will be little difference between analyzing the data of a thousand customers, compared to analyzing the data of a million customers.
When creating and growing an online business that scales, you must keep in mind the key characteristics of scalability. Automation, product focus and continuous feedback are all critical in ensuring your business will be able to not only cope but thrive with a growing customer base.
The ever-increasing use of the internet has created many opportunities for online products and solutions that will make entrepreneurs thrive. Yet, it’s important to ensure your business is designed to scale well, otherwise expenses will grow while your time will be spent inefficiently on day-to-day operational matters.
So, keep scalability in mind from the outset and do your best to design a business that runs itself.