10 Ways to Stay Lean in a Startup

Great ideas, marketing, and resources all cost either money or time, which are really, one in the same when it comes to building your own company. Those with money can spend it on the skills they don’t have, but those without money have to be a little more creative with how they fill the gaps until they either reach profitability or attract the right investors to fund them.

For those of us starting companies without the financial tools in place early on, we often struggle with what to spend money on, how to protect our equity, and when it is the right time to find that additional funding. Hopefully these 10 ways to stay financially lean will help you avoid some of the bigger mistakes we founders make.

1.  Lease Your Software, Never Buy

With cloud delivered, subscription-based software now prevalent throughout all verticals, it should be easy for your team to find the ones that meet your needs, and won’t cost you large lump sums to get up and running while money is tight.

2. Work Remote or Get Shared Office/Meeting Space

Between online conferencing, shared meeting spaces available almost anywhere, and companies like Regus offering virtual office space there’s no reason to get locked into an expensive office lease when all you really need is a a way to meet regularly, or reserve a room for important meetings with clients and partners. Less overhead means a longer runway.

shared office space

3. Look to Your Network for Occasional Free Help

If you’re starting a company, you most likely have had some success in the past, and those people that you worked with along the way most likely can lend you a hand in the early-going. Call in owed favors, look to past leaders for advice, and let your network help you if they want to. Doing it alone is not worth whatever glory you think it is.

4. Avoid Over-Outsourcing

If you’re hiring more than a few consultants to help you get your business off the ground, it’s going to become very very expensive quickly, and if you don’t have the internal team to support those needs, you could wind up spending all your cash on temporary expertise that will be missed later on. If this means adding another team member, it makes sense as long as you’re saving money.

5. Early Revenue is Only Fuel, Not a Payday

Often times, companies see their first revenue and look at it as if they’re hard work has finally paid off, and it’s time to enjoy it.

Wrong.

Any early revenue you see should be thought of as funding and not a payday. Paydays are for when you’re profitable.

6. Stop Buying Self-Help and “Startups For Dummies” Books

This is more of a general life lesson than anything else….

The only people getting rich through self-help books are the people publishing them, and the people writing them. If you need help building your company from the ground up, find mentors, join incubators, and put in the legwork it requires. There are no shortcuts.

5. Give Equity to Key Contributors In Lieu of Pay

My first invitation to consult for a startup was a paid role, but I would have been open to taking a small stake in the company instead of the money to help the company stay lean. You’d be surprised how many high-value and talented people are willing to take a chance and work for equity over a short payday if the opportunity seems right. Especially if you present it as an investment opportunity.

6. Don’t Give Away too Much Equity

Almost a total contradiction to #5, but there’s a fine line between saving money by handing out equity, and giving away your company before it ever gets started. Do your homework on valuating your company, and only giving away what’s fair for both you and the people you bring aboard. Some people are worth more than others, and that’s not a bad thing.

7. Profiitability & Funding Are More Important than Bells & Whistles

Too many startups go broke trying to build it all at once, or spending money on things that could wait until the company has more money, or at least some traction. There’s nothing sadder than watching a company build something amazing, and then run out of money before they even get a chance to market it properly.

8. Find Multi-Hat Talent

Specialized talent can drain early-stage companies when there’s so many roles that need to be covered by an understaffed team. Look for people who have a broad range of skills and fill the gaps in different areas instead of finding that one person who’s killer at only one thing. I’d rather have 3 Bs than one A+ and two Fs.

9. Consult Your Leaders When Setting a Budget

Too often, startup founders and investors plan their initial budget before consulting with the people who will be spending that budget. If your budget hinges on costs you cannot accurately predict on your own, it’s almost a guarantee you’re going to under-invest, and run out of funds sooner than expected. Creating a budget should be a team effort, not just an executive decision.

10. Create a Choke-Point for Spending

Spend should always go through one choke-point where a key decision maker or makers are rigorously evaluating the need to spend on anything. It can cause delays, but it can also prevent disasters later on when someone finds out the company is stuck in a financial obligation that was unnecessary.

 

Good luck to all of you out there building companies!

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  • 8 Tips for Growing Fast and Lean – Meet John Rampton – Entrepreneur, Investor and Connector

    March 25, 2015

    […] spree. Remember, you may need to use this overhead if you need to scale up or pivot. A couple of ways to accomplish this is by leasing your software, working remotely, avoiding over-outsourcing, and realizing that early […]

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