Lean Startup? Follow these 10 money-saving tips to grow your company with a small budget

lean-startup-finances

Startup founders have many issues to worry about during their journeys. Growth is something they need to be envisioning every day. Sales, team preparation, cash flow and client’s acquisition are other points to take their laser focus on.

Growth demands funds and small businesses’ budgets need to prevent big expenses, having awareness of the damages that can be inflicted by said expenditures on the near future of the startup operation.

When the founder team can commit to a thrifty behavior and to a “lean approach”, new businesses can save their hard-earned cents and ramp up in better conditions for the scale-up phase. In this article we give 10 tips for keeping your startup on a small budget and stretching your earned Euros at a pace and price that your company and team will appreciate – and thank you later.

  1. Focus first on basic activities and second on activities that bring the highest return per every hour spent in it

Every startup founder has a waterfall of urgent tasks to be done, every day. Instead of spending time on activities that don’t yield great results, try to focus on activities that yield the best results. One good idea is to list all the tasks that need to be done every day and, according to their confidentiality, delegate or outsource activities with less impact and concentrate the team and the founders in activities that have higher impact that day, week and month, in that order.

  1. Make decisions based on cash-flow, and put the team in perspective every 10 to 15 days

A lean startup structure depends, among other factors, on the adoption of a cash-flow-based decision making. This concept must be clear to everybody in the company, especially for sales and marketing professionals. There is always a broader conflict between commercial and sales initiatives and the financial and legal teams. While some want to accelerate, others must show the first ones that the company must slow down in expenditures and must be able to generate more capital per spent capital unit.

The simple reason here is because the inability of a company to generate and acquire cash is its pathway to destruction. Everyone in the startup must be interested in the company’s ability to generate cash and also on the team’s behavior to prevent spending every cent that should not be spent in unnecessary and “non-returning” internal activities, exhibitions, hotel stays, marketing actions, etc. The financial team must ideally show a cash-flow statement every 10 to 15 days in order to raise awareness and the founders must make very clear the values of not overspending beyond the cash-flow means, by setting examples and a code of conduct for all to follow.

  1. Do not allow expenses that are not coherent with cash flow and startup moment

An extension of point #2, point #3 points out to the fact that it is not because the startup has profited from a good sale or because it has been invested that the team or the founders can give themselves some bonus or perks and relax the austerity in the expenditures.

Instead of spending money on expensive meals with clients who are already onboard, encourage staff to be more down-to-earth and frugal, choosing places that will be so expensive, but still, have a good ambiance and quality. Instead of staying more days in another city spending on meals and hotels when you already finished your commercial or operational mission, try to get an earlier flight and a refund for the days you do not need in the hotel, as this will add up to the financial results in the end of each quarter and the year. Pursue simplicity and honesty with yourself and the team as the latest sophistication.

  1. Invest in Branding and financial management

Successful businesses have branding and financial management as cornerstones of their long-term strategies. Even “lean structured” companies cannot underspend in those areas.

The fundamental point in branding is that your company understands and spreads the values and intangible features of your brand, keeping sales afloat and pushing for more prospection among clients and non-clients alike.

In the financial management area, make sure you have one person who understands and has experience in financial management and products. They are be the best professionals to control spending and monitor revenues, to choose financial products from banks and governments and to deny expenditures that do not comply with the moment and the present or short-term cash flow. Do not overlook or underestimate this position, as a good financially experienced director/founder is very important for your company’s success with the wealth of knowledge and connections that he/she will bring from his/her previous positions.

  1. Decide fast and implement faster (ideally – not always possible)

Many decisions are delayed or procrastinated in our own lives and in our companies because they are not on the priority list that day or week, or the whole team taken to decide is not present in the company. It is incredible the time and money lost and the missed opportunities that could arise from faster decisions on a daily basis in most startups.

The founder team must always have this as a priority – scaling the urgency of decisions and not leaving them behind. When the time comes, and pressure mounts, usually the same decisions will be taken, as they were previously thought of or discussed – that is, the team makes the decision they already knew needed to be made weeks or months earlier.

The earlier tough and difficult decisions are made, even when less details form their basis, the less costly they are and the longer you have for implementing the follow-up actions and getting the results with more team members involved in the process.

A speedy implementation is as important as fast decision-making. Do not be that kind of founder that only dictates decisions or agrees with the teams’ decisions and does not participate in the implementation. Always find yourself in the implementation efforts so that it improves your next decision as seeing what are the real obstacles and hindrances in the real situation.

  1. Focus on commitment, track record and skills, not personalities

The human resources area is always a difficult and delicate one in any startup. Everybody is overworking and getting underpaid (when they get paid) in the beginning. It is very common for friends to create companies together and invite or call other friends to join the team. If that is not made with a high degree of selflessness and scrutiny, you end up hiring people who agree most of the time with you rather than people who have the commitment, track record and skills you need to keep your business afloat and grow it.

There is very little room for error in the people part of a startup, so try always to put commitment, track record and skills before personality when hiring a new person. Always look out for dubious characters who would damage your operation for just keep being who they have been so far in other companies and not improving or changing. Listen to their previous employers and colleagues whenever possible. Look for the green light of all members of the founding team before hiring someone new, and hire only when needed, not just to inflate headcount.

Some authors defend that one should look for personality first, because skills can be learned and a personality that does not fit in the beginning is almost certain not to fit later in the company. I humbly disagree and prefer to look at commitment, track record, skills and personality, and select my teams based in that sequence.

  1. Do it before you delegate or outsource it

Your team, product development, clients and financial operation should be your highest priority. That is why delegating and outsourcing will help you grow faster. But unless you know your company processes and operations from A to Z and helped creating them, you might make very expensive outsourcing mistakes, if you are not familiar with what you are seeking to outsource.

When you go through all sectors in your recently created company and try to establish and to learn everything from the beginning, you will be able to understand how much resources and support you need for each task that you may consider delegating to members of the team or outsourcing to external suppliers.

  1. Automate, automate, automate

Automating tasks that do not need so much human input can save hours and thousands of euros in the end of the month. E-mail templates, documents and files sharing, team member remote collaboration, sales funnels integration with CRM systems, billing/invoicing platforms, meetings scheduling for outside and internal meetings, inventory management and a few other tasks can be automated with systems that do not cost much and fit the budget of most startups.

The early adoption of such systems and automation will likely result in more efficiency and the company will not need to hire paid staff for these tasks, or spend team’s valuable hours in repeated tasks that can be replaced by automated ones.

  1. Build partnerships and cross sell whenever possible.

Always try to build partnerships with companies that have clients who may benefit from your services and whose clients can benefit from one of your company’s products and services. Always try to find public within your partners’ portfolio who you can cross sell to.

These agreements require a strong degree of trust, confidentiality, mutual understanding of one another’s businesses, processes, client base, revenue streams and demands match. However, they can help both companies learning process and sales projections and are highly rewarding for the involved and most of all, for their clients.

  1. Stick to your mission and only do what you do best – or learn to say NO

Having a clear mission and staying focused on it is one of the best ways to keep a lean and savvy company structure and operation. Try to stay the more focused you can on your critical activities and look at every possible task that deviates from the basics with the magnifying glass of whether it generates revenue or not, whether it stop losses or not.

Saying NO as a company to tempting possibilities that are not in your short and mid-term scenarios and that will demand a lot of time and resources from you and your team is one of the hardest lessons to learn in a startup, especially when the invitations and possibilities come from business partners.

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2 COMMENTS

  1. Most startups fail because of money problems. Saving money means saving a startups to fail. You are giving a very valuable info Bernardo. Nice!

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