Scalability
Short definition
Scalability is unit cost falling as volume rises and contribution turning into FCF. Operating leverage is required but NWC and capex ceilings can break scale.
Detailed explanation
Software-like low marginal cost scales; production and distribution create step-fixed cost at line and warehouse jumps. High DOL does not mean scale produces cash.
SGR and collateral cap the financing of a scale story. “We will turn profitable at scale” is break-even sitting outside the demand band.
Why it matters for the CFO
Investors pay multiples for a scale narrative; the CFO wants cash scale (FCF/sales).
How to read it
Scale exists if unit contribution and NWC days improve. Sales growth alone is not scale.
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Definitions are educational. They are not investment, credit or tax advice.