Minimum Efficient Scale

Today, I want to introduce you to (or perhaps remind you of) the concept of the minimum efficient scale.

Let’s take a look at what this phrase means.

First, the word “scale” refers to size.

In the software startup world, “to scale up” means to “get big fast.”

In economics, economists talk about “economies of scale.” It is the notion that, as a company gets bigger, it is able to achieve cost savings through its “scale” or the size of its operations.

For example, Amazon is able to process and deliver its customers’ orders very efficiently because of its “scale.”

The concept of “minimum efficient scale” is less well known and is a less-used term.

It refers to a business having “just enough” size to be able to produce a product or deliver a service at a reasonable cost.

The same concept can apply to how you handle the daily chores of your personal or professional life.

I’ll give you an example.

Last night, I made a batch of quinoa to stick in my refrigerator for the week.

I made about six cups of cooked quinoa.

It took me about 20 minutes from start to finish.

Had I only made one cup of cooked quinoa, it would have taken me 19.5 minutes.

Reducing the quantity by 83% only reduces the amount of my labor by 2.5%.

The reason for this discrepancy is that there is very little time difference to make one cup versus six cups.

I also can’t eat more than six cups of quinoa before it expires.

As a result, my minimum efficient scale for cooking quinoa is six cups.

I can make six cups at once on a single occasion, or I can make one cup on six different occasions requiring six times as much time.

Minimum efficient scale can be used in many contexts.

When I run errands, I wait until I have multiple errands and do them all in a single trip. My post office is next to the grocery store, which is next to my bank, which is around the corner from the drug store, etc. Rather than drive down the main road to town six times for six errands, I drive in one time and complete six errands.

At work, my minimum efficient scale for writing my Strategic Outlier newsletter that is physically mailed to my Inner Circle members is four hours. It takes me about 45 minutes to clear my mind, figure out what I’m going to say, and get into the flow of writing.

In a four-hour dedicated writing time block, I get 3.25 hours of productive writing done.

If I did my writing in one-hour blocks, I’d only get 0.25 hours of productive writing done. It would take me seven one-hour writing sessions to accomplish what I can in a single continuous four-hour writing block.

Minimum efficient scale.

One way to get more done without actually doing more work is to be mindful of your minimum efficient scale.

What is the minimum quantity of work to be done that makes sense to do… and can you structure your work so that you only do that work at the minimum efficient scale?

It’s something to think about…