There are dozens of business models. Some are scalable and some are not.
Scalability is critical, however, if you want to grow a big, fat successful company that is attractive to investors.
The key characteristic of a scalable business model is that the incremental cost of goods or services sold is going down over time—goods and services get cheaper to deliver. As demand increases, profit margins and overall revenues go up. The classic example of a company based on a scalable model is a business based on digitally downloaded software. After the initial investment in the application development, the cost of selling the software can approach zero. Think Microsoft. Another example of a scalable company is a website-based services business. Once the key website is developed, the cost of adding additional users goes down. Scalable companies include on-line communities like Facebook and service websites like eLance, TaskRabbit, ConstantContact, Flicker and Blurb.
Most scalable companies have technology at the core, like software.
Consequently, strategic intellectual property protection is essential to maintain the value.
Great Resource:
For an aggregation of great information about scaleability and example companies, see the RampCorp MindMap on Scalable Business Model by director Terry Chase Hazell.
The information provided in this legal blog is not intended as legal advice and does not create an attorney-client relationship. Please do not submit questions or comments seeking legal advice or submit confidential information through this blog. By communicating through this blog, you understand and agree that the information will not be treated as confidential and the publisher has no duty to keep it confidential.
{ 2 trackbacks }
Comments on this entry are closed.