Expert Speak: Mr. GK Pramod

Fundamentals of Business Scalability for SMEs

The Indian Small and Medium Enterprises (SMEs) are carving a niche for themselves in the growing economy of the nation. While their success is fortifying the economy further, it has become imperative for them to maintain a positive growth trajectory.

With this optimism, we will talk about how the Indian SMEs can have an effective business growth (discussed elaborately in the previous blog) with the vital 'Sutras' – Scalability, Sustainability and Profitability'.

We will have a glance and understanding of the Sutras in a practical way by referring to relevant case studies. This will make the entire process of understanding the Sutras more interactive and alive. We will begin with Scalability in this blog and understand its importance.

Scalability

If a Microlevel Entrepreneur is able to increase his/her business by duplicating his/her product/services without affecting the quality of the product/ service is called Scalability.

Importance of Scalability

• Scalability helps Microlevel Entrepreneurs to increase turnover first, and profitability next

Do’s

• Look at scaling up the business, only when the existing business unit becomes sustainable

Dont’s

• Making huge investments in new outlets may be too much of a risk for a Microlevel Entrepreneur

Case Study

We will discuss two case studies – Service business & Product business, to illustrate scalability in a better way.

1. Case Study-1 (Service Business): Mr.Ramesh Patil is a Microlevel Entrepreneur from Belgaum in Karnataka. He is running a Photography and Videography business.

The details of Ramesh Patil’s business organization unit are as follows:

1) Name of the entrepreneur: Mr. Ramesh Patil

2) Name of the organization : OM Shiva Videos

3) Nature of business : Photography & Videography

4) Details of turnover for the past 3 years:

Analysis:

Can Mr. Ramesh Patil create more number of Videography and Photography businesses providing the same quality of service to his customers?

If the answer to the above question is “Yes”, it is called a “Scalable Business”.

If the answer to the above question is “No”, it is called a “Non-Scalable Business”.

In this case Mr. Ramesh Patil can create more number of outlets. Hence this is a Scalable Business.

Challenges in Scalability in Service Business

When you scale up the business you need to ensure that the quality of the service remains the same in all outlets.

2. Case Study-2 (Service Business): Ms. Usha is a Microlevel Entrepreneur from Mysore in Karnataka. She is selling natural fresh juice.

The details Ms.Usha’s business organization unit are as follows:

1) Name of the entrepreneur: Ms.Usha

2) Name of the organization: Sushruta Fresh Juice Centre

3) Nature of business : Natural fresh juice

4) Details of turnover for the past 3 years:

Analysis:

Ms. Usha is a Microlevel Entrepreneur selling natural fresh juice in front of the parks in Mysore in Karnataka. She started one juice centre in a Maruthi van. Today, she has 4 to 5 juice business outlets across Mysore. So, her business is a Scalable Business.

Challenges in Scalability in product business 

If it is a product business, then marketing the product and reducing the price will be the two main challenges.

Scalability: Comparison between Product and Service business

Dear Microlevel Entrepreneur, do you think scaling up Mr. Mr.Ramesh Patil’s business (service business) is easier compared to Ms. Usha’s business (Product business)?

If we observe closely, scaling up of Mr. Mr.Ramesh Patil’s business (Service business) is more difficult compared to Ms. Usha’s business (Product business).

In a service business it becomes very difficult to maintain the same quality of service at all the business outlets. Even if Mr. Ramesh Patil hires a new person, say, by name Mr. Basappa Hallimatti, there will be a difference in the quality of the service provided by Ramesh Patil and Basappa Hallimatti. It is not that scalability is not possible in a service business. It is very important to adopt proper methodology and quality process in all the OM Shiva Videos outlets run by Ramesh Patil.

Bottom line to remember about Scalability

Once the existing unit starts making profits, it is better to scale up the business. Scalability brings stability to the business.

We will continue with the next Sutra – Sustainability, in my next blog. Hope this blog will be of help to the aspiring and existing entrepreneurs. Kindly leave your comments and queries.

The blog has been authored by Mr. GK Pramod, Co-founder, The Second Gear - MBA for Non MBA's Mentoring Module Concept.

To contact the author, e-mail at gk@tothesecondgear.com