If Mere Mortals Can't Run It, Your Business is Not Scalable
"Only scalable businesses can achieve the high-growth characteristics required to command market multiples attractive to venture investors.
So what is a "scalable" business?...to be truly scalable, a business must satisfy two criteria...incremental costs must be decreasing — ideally approaching zero. This means that the cost of each incremental dollar in revenue must be going down...
Criteria #2 is the real key to understanding “scalability” — but, as with criteria #1, it is also a necessary, but insufficient, criteria. For a business to be scalable — the business must be able to grow — even if you throw mediocre resources at it (both in terms of people and money — i.e., it must be able to flourish with dumb people and dumb money)
The importance to entrepreneurs is this corollary:
If your business requires smart talented hard-driving management or sophisticated investors or customers to grow, it is, by definition, NOT SCALABLE!!!...While VCs always prefer a good management team, it is really a bonus.
If a company’s long-term requirements includes any “super-humans” or “super-heroes” (management, customers, employees, investors, whatever) —– IT IS NOT SCALABLE!
If mere mortals can’t run it — IT DOES NOT SCALE!"
Read more in this Sacred Cow Dung post.
