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Are You Building a Billion-Dollar Brand or a Hobby?

 

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A scalable startup has inherent qualities that promote infinite growth. The ability to serve 1 million users flows from the infrastructure that efficiently serves 10.

As an individual, you have a finite number of hours to create 1 output. You are constrained by the number of hours you have in the day (let’s say 10), divided by the number of hours it takes to complete each output (let’s say 1). You, the individual, can only produce 10 outputs per day. This infrastructure does not scale.

In an attempt to build a billion-dollar brand, you realize you can create several downloadable, digital outputs, display them for sale on a website and allow for an infinite number of units to be sold. Now you have a scalable business model.

To maximize scale you want to focus on 3 key elements:

Broad Appeal – Broad appeal is the ability to expand your target audience. AirBNB started small in a few cities. The company focused on understanding each geographical area before launching into uncharted territory. Yet, they knew their service– rentals — had broad appeal. Their brand has scaled from Mountain View, Calif., to Dar es Salaam, Tanzania.

When you appeal to consumers in every corner of the world, you create a highly scalable offering.

Automation – Automation allows you to deliver your product at a quicker pace. Installation of software has evolved from shrink-wrapped products to downloads. It is no surprise that software receives the highest amount of venture-capital dollars of any industry. It is one of the most scalable industries.

Automating the delivery of your product or service increases the scalability of your business model.

Mass Creation – Mass creation is the ability to recreate your product or service seamlessly. Etsy and CustomMade feature designers who hand craft their products. On their own, the designers would have a hard time scaling. Yet, Etsy and CustomMade are able to scale as they can expand the number of designers they offer, allowing them to recreate the experience for the end user.

An individual is not scalable, yet a platform for individuals becomes scalable as more individuals are added to the platform.

If you don’t believe your product or service is capable of achieving broad appeal, automation or mass creation, you may not have a scalable business. You may, however, have an enjoyable hobby that can be expanded into a lifestyle job.

This post originally appeared on Atelier Advisors. Lili Balfour is the founder and CEO of the SoMa-based financial advisory firm, Atelier Advisors, creator of Lean Finance for Startups and Finance Boot Camp for Entrepreneurs.  All AlleyWatch readers are automatically eligible for a 50% discount on either of the courses using the preceding links.

Image credit: CC by Cliff

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About the author: Lili Balfour

Lili Balfour is the founder and CEO of the SoMa-based financial advisory firm, Atelier Advisors, creator of Lean Finance for Startups and Finance Boot Camp for Entrepreneurs, author of Master the Finance Game, and host of the Finance for Entrepreneurs broadcast on Spreecast.

After spending fifteen years in investment management and investment banking, she decided to develop a firm to cater to the specific needs of early-stage companies. At Atelier Advisors, Lili advises leading brands across industries: from tech to consumer goods. In the past, she has advised over 100 brands, including:

Bag, Borrow, or Steal, Visual IQ, Alpha Theory, Derivix, Practice Fusion, Peeled Snacks, Sustainable Minds, Firescope, Chix 6, Duchess Marden, Erin Fetherston, Eckart Tolle, and Stuart Skorman (founder of Reel.com, Elephant Pharmacy, Hungry Minds, and Clerk Dogs (sold to Netflix)).

While advising companies at Atelier Advisors, she observed a common theme – -brilliant founders avoided finance. She began writing about entrepreneurial finance to solve this problem.

As a native of Silicon Valley and a first generation Mexican American, Lili understands the importance of imparting wisdom learned in Silicon Valley to the rest of the world. Her goal is to teach the entire planet about entrepreneurial finance.

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