what the scaleability mean I’m gonna
answer that question in today’s episode
of ask Evan so recent guy asks a
question for one of my Twitter followers
love you guys ex girl Candace wrote in
to say I think our mango can you make a
vid on scalability what it means and
examples I’m in the food industry and I
sell slow-cooked barbecue meats so let
me answer this question in as non a
boring way as possible we get into some
accounting terms scalability relates to
how fast a business can grow and how
much earning potential it has and so if
you look at how a typical business will
grow your revenues will go up and your
costs will go up right this is revenue
these are your costs a business that
scales well that has high scalability
well how the revenues that go up and the
cost don’t go up too much and so this
extra room that’s profit where if your
revenues are going up and your costs go
up too then your profit isn’t as big and
therefore you’re not as scalable what
this really comes down to is the
difference between fixed cost and
variable cost fixed costs are one-time
costs that you have for your business
we’re variable costs are ongoing cost
with every product or service that you
sell so let me give you an example if I
come over here I have this statue right
this statue the fixed cost would be the
the factory that it was made in the
machines that were used to create it
where the variable cost would be the
bronze a naturally creativeness and so
this is not a highly scalable business
because every time that I need to ship
out one of these products I have to buy
the bronze right so my costs go up as my
revenue goes up as well and I’ll give
you two examples from my own background
of businesses that are highly scalable
my first company was a software business
with software there’s a lot of
investment at the start in development
right you have to hire programmers or
you have to spend your time being the
program and putting it in but once you
create a product all of those hours all
of that time and the money invested into
creating the software whether you sell
one copy of it
our million copies of it it doesn’t
matter it’s the same software it doesn’t
cost me more to sell a million than it
does one for every piece of software
that gets sold or downloaded I don’t
have any extra expenses so that’s a
highly highly scalable business and
that’s why so much investment dollars
venture capitalists angels pour money
into software because it’s highly
scalable you can make a lot of money
with it the other business is dancing
school that I’m involved in and our
fixed costs are our studio we have a
main studio here in Toronto in city and
that studio is in a mall and it costs
over $100,000 a year in rent so every
year over a hundred thousand dollars has
to be given out and rent to the
management company and whether we have
one student who comes out the class or
ten thousand students that come out to
the class that’s the capacity of the
studio doesn’t matter we’re still paying
a hundred thousand dollars so that’s the
biggest fixed cost there’s very little
variable costs as we grow this sound in
terms of having instructors but the
biggest cost is that studio space and so
that becomes a highly scalable business
as well so if your costs go up
dramatically as your revenues go up then
it’s not so scalable and it’s harder to
attract investment so if you look at
your business barbeque meats which I’m a
fan of and want to try some and maybe
make a video review on some barbeque
meats execute Candace that’s what’s up
it’s not a highly scalable business
because every time you sell your meats
you have to pay for that meat right
whether you have a physical product it’s
a lot harder to scale it up because
there’s cost every time you sell a
product now there may be ways to do it
may be value ID services that you can
add on top of it there may be other ways
that you can market it and it’s not
necessarily a bad thing right you could
still grow a highly successful business
that makes you a lot of money that isn’t
necessarily super scalable but you can
still have a ton of success with
hopefully that helps answer the question
about what scalability means if you need
me to elaborate further or give more
examples leave in the comments below and
I’ll see what I can do thank you guys so
much for watching my question the day
for you is is your business scalable
I’m curious let me know
see you guys soon believe thank you for
watching getting hungry actually I want
some slow cook barbecue means
answer that question in today’s episode
of ask Evan so recent guy asks a
question for one of my Twitter followers
love you guys ex girl Candace wrote in
to say I think our mango can you make a
vid on scalability what it means and
examples I’m in the food industry and I
sell slow-cooked barbecue meats so let
me answer this question in as non a
boring way as possible we get into some
accounting terms scalability relates to
how fast a business can grow and how
much earning potential it has and so if
you look at how a typical business will
grow your revenues will go up and your
costs will go up right this is revenue
these are your costs a business that
scales well that has high scalability
well how the revenues that go up and the
cost don’t go up too much and so this
extra room that’s profit where if your
revenues are going up and your costs go
up too then your profit isn’t as big and
therefore you’re not as scalable what
this really comes down to is the
difference between fixed cost and
variable cost fixed costs are one-time
costs that you have for your business
we’re variable costs are ongoing cost
with every product or service that you
sell so let me give you an example if I
come over here I have this statue right
this statue the fixed cost would be the
the factory that it was made in the
machines that were used to create it
where the variable cost would be the
bronze a naturally creativeness and so
this is not a highly scalable business
because every time that I need to ship
out one of these products I have to buy
the bronze right so my costs go up as my
revenue goes up as well and I’ll give
you two examples from my own background
of businesses that are highly scalable
my first company was a software business
with software there’s a lot of
investment at the start in development
right you have to hire programmers or
you have to spend your time being the
program and putting it in but once you
create a product all of those hours all
of that time and the money invested into
creating the software whether you sell
one copy of it
our million copies of it it doesn’t
matter it’s the same software it doesn’t
cost me more to sell a million than it
does one for every piece of software
that gets sold or downloaded I don’t
have any extra expenses so that’s a
highly highly scalable business and
that’s why so much investment dollars
venture capitalists angels pour money
into software because it’s highly
scalable you can make a lot of money
with it the other business is dancing
school that I’m involved in and our
fixed costs are our studio we have a
main studio here in Toronto in city and
that studio is in a mall and it costs
over $100,000 a year in rent so every
year over a hundred thousand dollars has
to be given out and rent to the
management company and whether we have
one student who comes out the class or
ten thousand students that come out to
the class that’s the capacity of the
studio doesn’t matter we’re still paying
a hundred thousand dollars so that’s the
biggest fixed cost there’s very little
variable costs as we grow this sound in
terms of having instructors but the
biggest cost is that studio space and so
that becomes a highly scalable business
as well so if your costs go up
dramatically as your revenues go up then
it’s not so scalable and it’s harder to
attract investment so if you look at
your business barbeque meats which I’m a
fan of and want to try some and maybe
make a video review on some barbeque
meats execute Candace that’s what’s up
it’s not a highly scalable business
because every time you sell your meats
you have to pay for that meat right
whether you have a physical product it’s
a lot harder to scale it up because
there’s cost every time you sell a
product now there may be ways to do it
may be value ID services that you can
add on top of it there may be other ways
that you can market it and it’s not
necessarily a bad thing right you could
still grow a highly successful business
that makes you a lot of money that isn’t
necessarily super scalable but you can
still have a ton of success with
hopefully that helps answer the question
about what scalability means if you need
me to elaborate further or give more
examples leave in the comments below and
I’ll see what I can do thank you guys so
much for watching my question the day
for you is is your business scalable
I’m curious let me know
see you guys soon believe thank you for
watching getting hungry actually I want
some slow cook barbecue means
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