Scaling — The Daily PPILL # 136

Scaling — The Daily PPILL # 136

“We’ll make it up in volume”.

I am still appalled, almost offended by this response. Especially when someone doesn’t truly understand how their business works and makes them money. It is even worse coming from someone who is compensated on revenue, not profit.

Many times I also hear how something is scalable. How it can be replicated easily and repeated many times. But the question that rarely gets answered before any of these ideas come up, is how much each unit of production (an additional widget, another hour of service, another night of performing, another gelato served) will add to the profits. Their marginal contribution.

If we don’t understand this for sure, we face the risk of losing more money as we augment our capacity. Basically, that we scale ourselves into bankruptcy.

Figure out one unit. Make it work right. Make money off of it. THEN scale.

As published on The ChannelMeister