Article Contributed by Doug Barden
A lot of start-up businesses are created from nothing more than a brilliant idea and a willingness to work hard. Others are awash with working capital and bloated with assets from day one. But lean is a good philosophy to buy into for it will keep you focussed on the core principles as you build a sustainable business.
Take the Fast Road to Profit
No business is truly a business until it is capable of generating a sustainable profit. Until that point, it is a work in progress. In order to reach that point, you need to be 100% focussed on building the business and acquiring new customers. Getting bogged down in unnecessary details will only distract from this task. So instead of wasting time checking out fancy new office space in a desirable part of town, concentrate on the important stuff.
Six Ways to Keep Your Business Lean
- Do not borrow too much capital – Only borrow what you need. The more money you borrow the more the loan will cost you in terms of interest.
- Rent instead of buy – Never buy an asset when you can rent it. Buying assets ties up too much working capital and negatively impacts on cash flow.
- Keep management systems streamlined, simple and cost effective at all times.
- Keep a close eye on the financials – Tracking income and expenditure will help keep costs down and prevent cash flow problems.
- Don’t over staff your organisation – Employees cost money, so make sure each employee you hire can be justified, and if they can cover multiple roles, even better.
- Keep your overheads down – Never pay any more than you absolutely have to and always renegotiate supplier contracts regularly to ensure they remain competitive in the current market conditions.
Develop a Customer Centric Business Model
Your customers are the heart of your business, or at least they should be. To this end, the ethos of your business should be about improving your products and services and ensuring the customer experience is positive at all times. Make ‘repeat business’ your buzz word. The more repeat business you can generate the shorter the amount of time it will take for your business to start making a profit. On the other side of the coin, if your products and services are of a sub-standard quality and your costs are spiralling out of control, it won’t be long before the business is in trouble.
Why Lean is a Long Term Strategy for Success
Excessive business debt and bloated cost heads are the enemy of a successful business. If you can work hard at keeping your running costs down to the bare minimum whilst increasing a healthy sales ledger, you are well on the way to building a long term successful organisation that will be sustainable even in an economic downturn.
It isn’t always easy to run a ruthlessly streamlined organisation, but if you want to be successful, it is a smart approach. Adopt a lean approach from the inception of your business and it won’t be long before you are running a successful, profitable business that will survive whatever the prevailing economic conditions.
About the author:
Doug Barden is a managing partner at Barlow Andrews, a leading chartered accountancy company in the UK. For more information, visit http://www.barlow-andrews.co.uk today.