The concept of a “lean startup” may seem obvious since most new companies don’t have a lot of cash to spend anyway. They are forced to be thrifty and resourceful until they either raise funds, or begin accruing significant cash flow. But often times founders fall into the trap of over-spending venture capital dollars, which can lead to inefficiencies across all of their processes, causing them to ultimately have to “trim the waste” in order to meet their bottom line.
The idea of waste-reduction in a company was originally limited to manufacturing companies, where waste was trimmed throughout the production process in order to meet or improve the bottom line. However, every company, no matter how big or small and no matter what they provide their customers, can apply the same principles – focus on value for the customer and maintain leanness for sustainable growth and profit.
In order to scale smart, it’s best that startups avoid building waste in their company in the first place. However, since it is a common mistake, we’ve got 4 ways to cut waste in a startup:
#1: Return to the Early-Day Mindset
During the bootstrapping days, startups are usually using their own money or cash they’ve reluctantly collected from family and friends. The focus was creating a valuable service or product for the customer with very minimal resources. This lean mindset forces founder teams to be as resourceful as possible, as it takes startups on average three years to become cash-flow positive. Although this is usually a painful time for young companies, it’s important to revisit that mindset of providing your customers the most with the limited resources you have. How much extra have you added to your expenses since then, and what is truly necessary?
#2: Set Boundaries on Expenses
Having a budget is one thing, but making sure your team is staying within that budget is another. Keeping track of expenses may seem obvious, but it’s easy to turn a blind eye when you’re trying to juggle all that comes with running a company. Setting boundaries for your team on their expenses provides transparency within the company, as well as takes some of the pressure off the founders to constantly track down expenses.
#3: Grow with Intention
When your company is scaling, it’s tempting to ride the adrenaline wave and over spend. Remember, you’re still growing, and in order to sustain that growth you must make sure you’re intentive about each addition to your process, whether that’s a new partnership deal, new staff, or new product or service offering.
Go back to your lean mindset and ask yourself how does this add value to our customers, to the company itself, or to our processes? What outcome can I expect? If the outcome is minimal, you’re probably getting over zealous. Make every new addition intentional.
#4: Create a Flexible Culture Where you Can Analyze and Adjust
It’s important that, as you grow, you recognize areas where you can analyze progress and adjust as necessary. This is not only an important practice for the founding team, but at every level of the company. When you create a culture of flexibility, you naturally set the tone for team members to constantly analyze their processes and plans and make adjustments as necessary. Reminding your team from the top down that it’s ok to be flexible and make changes along the way is important, as the company learns and grows what works for you, your customers, and your bottom line.