Business 101: The Issue of Scalability
Posted on November 17th, 2009
It may sound like a good problem to have, but it is still a problem being had nonetheless. At some point in your business ventures, you may encounter the issue of having too many customers or too many orders and not having the infrastructure in place to handle this added volume. This can happen both with real goods and virtual goods, as well as service-based industries.
Consider the hobbyist who decides to start selling her arts and crafts through online venues like eBay and Etsy. For a time, this side venture provides a little bit of extra spending money, but it is not a primary source of income. She may be happy with this level of profitability, but what if she suddenly receives a surge of orders through Etsy. Bearing in mind that these may be handcrafted items, how can she keep up the volume? This presents the problem of scalability.
If she wants to stick with the part-time hobby of selling arts and crafts online, she may have to refuse some of these orders or limit the number of orders that can come over the course of a set time period. However, if she wants to capitalize on this increased interest and expand her hobby into a business, she will need to figure out how to handle the larger number of orders. Will she start to hire assistants to make the product? Will she outsource to a third-party manufacturer? What about the logistics of taking, filling, and shipping the orders to customers?
Whether you are just starting out with your small business or you already have years of experience in running it, it is still worthwhile to consider the issue of scalability and how you will handle it should you have the good fortune of increased volume. What is your contingency plan?
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