Lean Startup Strategies
Running a lean startup, especially with a lean budget, is a very different animal than running a startup with a deep well of venture capital behind it. You need to prioritize different facets of the business. It calls for different strategies as you move forward and here are a few of the most important.
Hire a Financial Expert Hiring someone with a solid background in financial management can feel like an extravagance, particularly if you’re already working with a limited budget. Even so, not hiring a financial expert, such as an accountant, often proves more costly to a startup over the long haul. A financial manager serves as a sanity check for your spending and can raise important objections, such as asking whether hiring additional staff is based on actual need or an unfounded expectation of rapid growth.
Disciplined Spending Eric Ries, author of The Lean Startup, notes that lean startups are defined by their discipline, rather than the exact way they deploy capital. The lean startup is not afraid to spend money on things that matter to the company, such as split-testing, assumption validation and launching a minimum viable product. Spending on these elements of the business helps to create revenue and pushes the company toward long-term viability. Spending on external signifiers of success, such as expensive office space, luxury furniture and splashy marketing campaigns early on is a good way to go bankrupt.
Ruthless Cutting Lean startups are ruthless about cutting, but only cutting the right things. As the business develops its core product, it tests customer response to the new iterations. This doesn’t mean a slavish devotion to what customers like. It does, however, mean being willing to stop spending money on product features, development and staff time for things that every customer seems to loathe. Slashing unpopular elements frees up cash and employee time to work on things that will make, rather than cost, the company money.
Hire Carefully Few things end up costing a startup more than a bad hire. Unlike large companies, where group efforts smooth out the incompetence or ambivalence of a single employee, lean startups depend on the full effort of every employee. A bad hire can disrupt release schedules and, in the worst case, tank the company. Spending a little more time and money on making good hires pays off in an improved likelihood of success down the road.
Lean startups don’t always have the luxury of a lot of startup capital. Whether your company is bootstrapping or just raising money one milestone at a time, you need to spend your money with discipline, cut ruthlessly, hire carefully and get an expert in the mix to manage the finances.
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