Lean Startup Founders Know Capital is Rare
Running a lean business is not just process, but a different mindset all together. Lean-focused entrepreneurs take the approach that capital is a rare and precious resource and that they must maintain strong fiduciary responsibility over that capital. Some lean entrepreneurs may not even realize they are taking this approach, while others are very intentional.
8 Things Lean Entrepreneurs and Startup Founders Do
Here are a few things lean entrepreneurs do that make the cash last longer and work harder.
1. Have a travel policy
2. Don’t buy employee personal items
3. Have a cash reserve of 3-6 months of payroll and other main expenses at all times
This is a big one. How is money saved or set aside part of being frugal? If an emergency or something unexpected happens (maybe an amazing opportunity) you have the capital on hand to handle the situation. When you have to acquire money quickly or under duress it can be very, very expensive. Your options under duress are often credit cards or other high-interest loans, bad fundraising terms or selling off valuable assets in order to acquire funds. Even worse—it could mean not making an important payment to a vendor or employee on time which can hurt your credibility.
4. Never pay full price
Many things are negotiable and if something isn’t, there is usually a way to get it cheaper or at a better value. You can buy pre-owned office furniture or if you’re in a coworking space you can rent conference rooms only as needed and let people know it costs money to rent them. Always have managers approve large ticket items and always ask employees if they can find a sale or cheaper option—people are resourceful! Make it a company motto: always get a deal! This isn’t being cheap or showing weakness in this business – this is being fiducially responsible.
5. Don’t underpay key employees
This one is a little counterintuitive but turnover, especially in key positions, is incredibly expensive!
6. Don’t purchase unlimited snacks and drinks for the office
7. Have a budget
Without a budget, it’s hard to allocate your resources to the highest-value items (and make your money work harder!). It’s easier to say yes to more expenses because you don’t have a target amount to spend. You might say yes to an office event this week for $500 not realizing that you are taking that money out of the payroll or marketing budget next month. With a budget, you know how much you can spend and what you have to give up to spend more. The financial resources of a business are all about give and take.
8. Look at the financials every month against that budget
If you aren’t looking at your expenses, you can’t know what you are spending money on. Without a budget, it’s hard to know how much you expect to earn (or spend) and whether things are going to plan or slowly spiraling out of control. Fast spirals are easy to spot, it’s the slow ones you miss if you aren’t looking closely each month.
So there you have it! 8 things that lean startup founders do that other business owners don’t. Are you not feeling confident in your budget (or don’t even have one)? Need a financial partner to keep you honest about looking at the books each month?
Talk to a CFO about how to improve your financial stewardship today. We’re here to get you on track!