28 ways to tell whether you’re running a ‘lean startup’
Serial entrepreneur and founder of Blur Group Philip Letts on how to spot a lean start-up in a crowd – and build one yourself
Lean start-ups are getting a lot of attention right now. Perhaps it’s a cultural nod to the post Lehman, pro-austerity climate mirrored through the latest business winnows.
Or a desire by new breed entrepreneurs to do their bit for occupy Wall Street – a two fingers to yet more slush fees handed to bankers, brokers or venture capitalists. The counter culture to cash gorged, venture capital primed, one hit wonders.
But what makes a start-up truly lean? Put most simply lean means that you are laser focused on what really matters. On the process for building a great business: Understanding a real market need, building the exact right solution, cost effectively discovering the early adopter market for it and using this traction to chart the most direct route to sustainable growth and profits via satisfied customers, partners and employees.
Lean is a philosophy and set of business principles and processes. Lean does not equal mean. At its core lean requires that a business from day one should beat the most direct path to its core raison d’etre – which is to generate cash surpluses. Indeed, until a new venture has reached the point where it sustainably generates cash it is merely an interesting concept or project. It is not as yet a business.
Here are some pointers on how you really ‘do’ lean:
1. Focus on the process of building your business to profitability as rapidly as possible – not on the frills. (At blur Group we went as far as publishing our manual
2. Be obsessive about the problem you will solve for customers and make sure that you solve the problem well enough that they will pay prices which include sustainable margins to enable you to generate the kind of cash you desire for the business
3. Be obsessive about your customers, profitably acquiring them and servicing them
4. Nail repeat business into everything you do
5. Build great systems, cost efficiently
6. Raise only as much capital as you need at every stage and always question hard whether and why you require this capital
7. Rent everything
8. Negotiate everything as cost effectively as you can. There is no such thing as being too cheap in a lean business
9. Do not over-engineer your products, processes, systems or contracts – you want to engineer your business just right for each and every stage of its growth
10. Always work on refining and tightening your business model and financials – be detailed and cautious
11. Until you reach profitability do not plan or engineer yourself more than 6 months out
12. Keep it simple: contracts, processes, procedures, systems, pricing, products, messages etc
13. Ensure that your cost base is the absolute lowest it can be at every stage
14. Plan everything to the extreme, top to bottom, inside out. You should never have a spare or under-utilised resource
15. Ensure your organisational structure is a flat as a pancake and until you are profitable all managers must be player and coach. Each with tangible objectives
16. Only hire exactly what you need, define roles clearly and take your time. Lean means you have to shop around diligently and fairly exhaustively
17. Try and put the ‘viral’ into products, services, websites and external comms
18. Think scalability and efficiency in all you do
19. Do not commit to overheads or long contracts of any kind until you hit sustainable profitability
20. Be fit for lean – literally as it is a long, hard slog
21. Teach lean to every employee, partner or supplier and ensure that it is cemented into all your core principles and processes
22. Make sure all your management team and employees celebrate lean and are eternal advocates
23. Cement lean into your core values
24. Stay lean for the life of the business – never become fat
25. Reward and celebrate activities that shift the profitability needle and not other needles
26. Understand and measure any key metrics that will drive you along and beyond profitability – to the most optimised earnings growth possible
27. Be ethical, diverse, up front, open, transparent and bold – lean means building a sustainable business
28. The more you grow the more you have to push lean to the very bowels of the business and back up to the very top.
Lean businesses care as much about the bottom line as the top – in everything they do, at all times. They get that turnover at any cost is the business equivalent of gross obesity.
That capital raisings are distractions from the core and that lean is a long hard slog. Succeed at it and you probably build a longer term, more valuable business with the right economics to make it through thick and thin.
A truly lean start-up is as passionate about being lean as they are about their brand and products. It is a way of life – an ‘organic’ business.
Corporate retro – back to basics. Where your number one goal is cash generation, your best route to this is a total customer focus and your surest path to failure being poor products and weak cost controls.
blur Group was a ‘lean startup’ and one of the most successful in Europe. Now blur Group has become an international business so it is developing the concept of ‘lean business’. One day it will be a ‘lean enterprise’.
Building a lean business is not for everyone. Think hard about whether it is for you. If you are up for it then do it to the max. Lean has little room for compromise or deliberation. Lean is forever – no gorging allowed! And lean is absolutely not for the faint hearted.