4 Commonsense Ways to Keep Your Startup Lean

Latest posts by Xenios Thrasyvoulou (see all)

Being successful means being lean from the start

If you’re in business and you haven’t heard the term “lean startup,” how’s living under that rock treatin’ ya?

Lean startups are now on the lips, and in the arsenals, of today’s entrepreneurs. At its core, the lean concept emphasizes the importance of remaining small and agile while not overspending on superfluous items.

Over time, however, the idea of a “lean startup” has become a lot less, well, lean. The concept has expanded to incorporate new theories and terminology, and now it seems there are thousands of things entrepreneurs must do to be considered “lean.” Responsibilities can include anything from forming small task teams to practicing all development in sprints to gathering for daily scrums.

It would seem that “lean” is now “beefy.” And while there’s nothing necessarily wrong with that, the additional elements can be somewhat distracting. Apparently, being a lean startup just got more complicated.

That said, going lean just takes simple common sense. When it’s broken down, a lean startup is comprised of the following four elements:

  1. Don’t raise too much money.

Obviously, having money in the bank is never a bad thing. But having too much can lead to complacency and poor decision-making.

Look at what happened to New York-based data-gathering service Monitor110 in 2008: Plain and simple, the company shuttered because of too much dough, as one investor explains. The company didn’t feel the need to be scrappy and conduct market research. Instead, it thought its money would buy the creation of a perfect product that the world would embrace without question.

Budget your fundraising. Know how much money you need, and only raise that much.

  1. Don’t fluff up your sales projections.

As entrepreneurs, it’s in our nature to be optimistic: We’ll introduce our products to the world and soon be sailing away on our private yachts, watching our old Ramen-filled lives receding with the horizon.

Overestimating your sales is dangerous; it will cause you to spend money faster than you should. Instead, go to the other extreme and underestimate your sales. Setting the bar low forces you to pace your spending, and it’ll feel great when you exceed your expectations. You’ll appreciate the money you saved, and you’ll always find a place to invest it down the road.

  1. Manage every dollar like it’s your own.

This is arguably the most important part of keeping lean. Take personal accountability for your funding and expenditures. Think twice about every dollar you consider spending. Are these expenses necessary? How will they improve my sales? If you can’t clearly answer these questions, hang on to the cash

Your goal: to amass 12-18 months’ worth of cash flow. This might sound impossible, but smart money management will send you on the right path.

  1. Hire slowly

Hastily hiring too many employees is one of the fastest ways to drain the bank. Don’t rush into hiring a huge staff just because you can afford to. Each hire should be absolutely necessary — not a nice-to-have one.

Wait until adding more bodies is vital to your operation. The wait is key to remaining lean and keeping your options open.

If it has to be said, these tips are common sense. Following them can launch your startup into the big leagues, like Shutterstock, where an $800 investment by one man eventually morphed into a $760 million corporation.

There’s nothing fancy or complicated about going lean, so don’t worry about the glorified buzzwords and complicated criteria. Come out from under that rock and join the race to be the next best lean startup. Doing it is just a matter of staying smart and savvy.

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