Many small and medium enterprises are able to sustain good profit and reliable customer base. They may last for decades, but only very few of them could grow into large enterprises. Despite capital injection and hard work, many small businesses are not able to break the invisible confining walls that may prevent them from reaching the next level of profitability and turnover. It may be quite disappointing for ambitious, passionate and hardworking entrepreneurs to stay in the same level of mediocrity. One of the likely factor for lack of rapid growth is unscalable business models. In general, no small business can exceed its own business model. A business with mediocre business model will also become mediocre at best. An effective business model is able to deliver integrated processes and means, to help us achieve our business objectives. Values can be created and delivered by proper business models. A combination of well-performing companies and effective business models will provide the highest possible results. No matter how hard we work, a mediocre business model won’t give us higher results. In this case, it is very likely that business model isn’t scalable.
A cheese maker may only have a limited amount of cows and the source of raw materials, may become a constraint. It means that the small business may only able to produce a specific amount of cheese each month. The cheese maker may satisfy demands and expand at desired levels only if they purchase more cows to get more milk, as raw material. The business model should include a plan for future expansion, through capital injection and other means. If the business model isn’t scalable, small business could become a long-time prisoner. Fortunately, it is always possible for business models to modify their business models to become more scalable and flexible. If not, profit and revenue will be limited, because raw materials and other factors could become a constraint. A change of business model may be needed if specific factors have caused specific limitations in a company. This is especially true if competitors are able to produce more products and they start to gain more market share.
Businesses may also have slow growth if they depend too much on new customers. Getting the first customer can be an unforgettable experience for many business owners. However, they will need to gain dozens more customers. In fact, the sole obsession of many business owner is to get new customers. Instead of providing more services to loyal customers, they focus too much on getting new customers. In reality, growth can be achieved due to a group of recurring buyers. Repeat customers will become a strong base for further growth. If current customers have been served well, they will continue to buy our products for years to come. In this case, it is time to get new customers, after we are sure that previous customers have provided us with new results. Keeping a customers is actually a difficult task and requires constant effort.
