Scaling up: Supply and Demand

Scaling up can be tricky business. You finally start to gain some traction and market acceptance. The business is not staggering up operating losses anymore. Perhaps even breaking even. It is a promise of exciting times ahead.

It’s a catch 22 though. You might scale up and find yourself sitting with stock on hand and additional expenses. You could also scale up demand, offtake agreements and larger customers with orders that need filling. Fail to meet those orders and you fall back to square one.

As tricky as this may be, it’s usually easier to scale up once the market is secured. If you have guaranteed sales, it easier to get funding, activate resources and employ people. You don’t have to overcommit and risk losing the customers. Get your customers to buy into your dream. Letters of Intent go a long way to scaling successfully. They are also bankable.

The economics are quite simple. When the demand is high, the power goes to the supplier (you). You can set price, terms, and timeframes. If you fix supply first, you stack up your risks, that shifts the power balance.

Be smart.

Ivan Diaz

 

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