What is a Ramp Up?
A ramp up is an increase in the amount of products or services a company sells, usually by expansion into new markets or geographic regions.
How Does a Ramp Up Work?
Let's say John Doe opens a sandwich shop. He offers custom breads, imported meats, specialty cheeses and unusual toppings. Customers are lined up all day every day.
John opens five more stores in other neighborhoods and decides that he wants to go national. In order to ramp up, he decides to sell franchises in 15 other states. It takes a year to open all the stores, but by the end of the year, his sandwich shop has 100 locations.
Why Does a Ramp Up Matter?
In any business's life cycle, the ramp up is a time when the quality of execution is crucial, because the skill and effort it takes to increase a company's output requires expert capital deployment and management ability. However, the ramp up is also how companies take advantage of their existing infrastructure (their fixed costs) and use it to generate more profits.