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What is a Scalable Business Model?

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A scalable business model is a business that sees increasing returns as it invests more in capital, labor and services. This generally means that unit costs decline as your business expands. Business models that aren't scalable are potentially profitable as a small business but can't grow in an economical way. As such, investors in growth companies look carefully at results for confirmation that a business is scalable. The following are illustrative examples of business scalability.


A retail chain that can add new stores without negatively affecting same-store sales. A popular brand may be able to add stores in many cities without experiencing negative impacts on same-store sales. This tends to be profitable as fixed costs such as product development can be shared between more stores.

Information Technology

In some cases, an information technology product has structural, design or infrastructure issues that prevent it from scaling to meet higher business demand.


When you hire salespeople they need to bring in far more revenue than their salary. If they don't, it can be an indication that your business model isn't scalable.


An airline has 100 profitable routes between major cities. As they add more planes, they start to cover less lucrative routes and find that such routes aren't profitable.


A firm spends $10,000 on promotion and finds that it increases sales by $100,000. Encouraged, they spend $100,000 on promotion and find that it increases sales by $105,000. The firm decides that their promotion strategy doesn't scale.


A sports equipment company is able to decrease unit costs dramatically when they shift from producing 1,000 units a day to 12,000 units a day.


The shipping department of an ecommerce company can ship 100,000 packages a day with 100 employees. They hire 100 more employees and find that capacity only increases to 150,000. They decide that their current processes don't scale and invest in optimizations such as automation.
Overview: Business Model Scalability
Definition (1)
A business that is able to decrease unit costs as it expands.
Definition (2)
A business that is able to grow profitably.
Related Concepts

Business Models

This is the complete list of articles we have written about business models.
Added Value
Augmented Product
Bricks And Clicks
Business Markets
Business Products
Business Services
Club Goods
Coercive Monopoly
Collective Business
Complement Good
Consumer Business
Consumer Goods
Consumer Services
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Digital Business
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A list of common business models.

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A retailing strategy that combines physical locations with a strong ecommerce presence.

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A definition of complementary goods with several examples.

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An organization that represents businesses or professionals that have something in common.

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The business difference between products and services.

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A few examples of common business models.

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The definition of business model.

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A guide to product development.

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A checklist for developing a product strategy.

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Product Value

A definition of product value with examples.

Product vs Feature

The difference between a product and a feature.


A definition of productization with examples.

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A definition of target costing with examples.

Market Fit

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Service Development

The steps to develop and launch a new service.
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