How is 'scalability' defined in a business model?

Scalability in a business model refers to the ability of a company to effectively manage increased demand without a proportional increase in costs. This means that as the business grows and sales increase, the systems, processes, and resources already in place can accommodate this growth efficiently. A scalable business model allows for growth while maintaining or enhancing profit margins, as it can utilize existing infrastructure and capabilities to handle larger volumes of business.

For example, a software company can add more users to its platform without significantly increasing its costs or needing to double its infrastructure or workforce, demonstrating a scalable nature. This capability is crucial for businesses aiming for rapid expansion because it ensures they can respond to market demand without compromising quality or operational efficiency.