Define scalability and identify a key indicator that a startup is scalable.

• A. Ability to grow with a proportional increase in cost.
• B. Ability to grow without a commensurate increase in cost.
• C. Ability to grow only if you hire more managers.
• D. Ability to grow solely through external funding.

Answer: (C)

Scalability means you can increase output and revenue without a proportional jump in costs. A startup is scalable when its costs grow more slowly than its revenue, often through repeatable processes, automation, and a business model that multiplies output without linearly increasing resources. The best choice captures this idea: growth without a commensurate increase in cost. If costs rise in step with growth, or only happen because you hire more managers, the economics aren’t scalable. Relying solely on external funding doesn’t prove scalability either, since funding can enable growth but doesn’t by itself improve the cost structure.