Here is something I just found linked in a newsletter I subscribe about scalable businesses.

Of course the dream of every investor is to find the perfect scalable business where costs go down as you grow and anyone can run it (the legendary W. Buffet says he will only invest in companies that could be run by an idiot… because some day an idiot will). This would most likely put the company in auto-pilot while being a cash cow; but, even if I believe this is mostly a myth, because we all know it is never that easy, there are some fundamental principles that make sense.

I’m pasting below a couple of insights stolen here from Christian Mayaud, that really make a case.

A scalable business requires:

a) Marginal costs decreasing along revenue curve growth

This means that the cost of each incremental dollar in revenue must be going down.

b) The ability to grow with mediocre resources (people and capital)

If your business requires smart talented hard-driving management or sophisticated investors or customers to grow, it is, by definition, NOT SCALABLE!!!