In business, "scalability" refers to the ability to expand without running into obstacles that increase the per-unit costs of doing business. Scalability can be applied to an entire business, or for individual units, systems or facilities within that business. Linear scalability is the ability to increase production inputs like labor by a certain percentage and get an equal percentage increase in output.
Say you own a workshop with 100 employees. They produce 1,000 units a day with a per-unit production cost of $50, which includes materials, labor and overhead. You want to expand, so you add 50 more workers. If the new workers can produce at the same rate -- 10 units per worker per day -- and at the same cost -- $50 per unit -- then the workshop has linear scalability. A 50 percent increase in inputs produces a 50 percent increase in production at a 50 percent increase in total costs (and, presumably, a 50 percent increase in profit). While per-unit costs remain the same, the total costs will increase since you're producing more units.
Factors Affecting Scalability
Any number of factors can reduce scalability. If your workshop doesn't have room to accommodate more workers, you'll need to rent more space, which may increase unit costs. If you have to pay higher wages or overtime, that will increase unit costs, too. And of course, demand has to exist for your greater output, or you're just throwing money away. On the other hand, economies of scale can enhance scalability. For example, if you can buy materials at a low cost because you're ordering more of them from your supplier, that will reduce your unit costs and boost scalability.
Cam Merritt is a writer and editor specializing in business, personal finance and home design. He has contributed to USA Today, The Des Moines Register and Better Homes and Gardens"publications. Merritt has a journalism degree from Drake University and is pursuing an MBA from the University of Iowa.