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Before you start scaling up, you need to know if your social business is ready to do so. Here are three questions to ask:
1. Is your core product or service clearly defined?
Are you very clear on what your core product or service looks like? Can you describe clearly how it is delivered and exactly what specifications it has? Could you put these into a manual and have someone else replicate it exactly? In other words, have you successfully completed the phase which we described in a previous blog as ‘standardization’ of your products and services?
In the case of the solar company SolaRise (a social business selling solar panels in rural Africa), for example, their core product is very clear: the Solar Kit. For the micro-lender Fair Finance, it is a single small personal loan made to a financially excluded customer. For an education venture, the core product might be a workshop or class. For a healthcare venture, it might be a training program for patients in how to manage diabetes.
2. Is your core product or service financially viable?
Can your core product or service be sold for a price that more than covers the costs of delivering it? In other words, can you sell each unit with a positive gross profit margin?
In the SolaRise case, suppose one solar kit is sold for $250, but the actual cost of the kit is only $150. This can be scaled: if they were to franchise their technology and allow others to sell their solar kit, it could be done profitably. If the gross profit margin was negative, scaling up wouldn’t work – more units sold would drive the company deeper into losses. Have you already worked out the economics of your core product, such that you are confident that more sales means more profit?
3. Does your business model depend on specific people or other factors that are not scalable?
Many ventures depend on the skills or knowledge of a particular person or group of people (this might be true for consultancy firms, for example). Is this team stable and mature enough to be able to dedicate time to a scaling process? Other ventures depend on the unique characteristics of a particular location, or special relationships with particular institutions or people. These ventures will be hard to scale up.
If your venture falls into this category, you need to consider how to help it evolve beyond these characteristics or else accept that you will remain a specialist, niche venture. If you can answer yes to these three questions, you are ready for scaling.