Lean Startups in the New Economy

Many people assume that you need a lot of capital in order to start a small business. They search for investors, talk to an endless lineup of banks, and get turned down at every corner. It’s a common story in this economy, and one that shuts down many small business ideas before they ever see the light of day.

However, many entrepreneurs are not willing to take no for an answer when it comes to their small business dreams. For these people, a lean startup is the only viable option.

What is a lean startup? In short, it is a way for businesses to begin with a smaller than average investment of time, money, and other resources. The lean startup is more agile and fluid, responding quickly to changes in the market and in the customer base. There are certain things that distinguish a lean startup from other new businesses. Here are just a few.

1. Start small. Whether you are looking at locations or batches of products, a lean startup starts small. Many lean startups begin selling products on the internet or out of the owner’s home, and initial product runs are kept as small as possible until the entrepreneur can safely predict their sales. This allows you to hone your products and your business plan until they match your customers’ needs exactly. In every business decision, keep your initial investment (and risk) as low as possible.
2. Do it yourself—unless you can’t. One of the sacred rules of a lean startup is that you should never hire someone to perform a job you can do yourself. As a lean entrepreneur, you will be shop-girl, housekeeper, and press release writer, often in the same twenty-four hour period. Outside of skilled work (such as logo design or web design) or jobs that require special equipment (such as manufacturing), you should never hire consultants or employees before they are absolutely necessary and completely funded by your profits.
3. Learn from success and failure alike. One of the real benefits of a lean startup is that it is flexible. You can change at a moment’s notice. This makes it all the more important to be in the process of constantly re-evaluating yourself. Make every sale a learning experience and every failure a chance to do a little better.
4. Don’t assume you know your customer. In fact, don’t assume anything. One of the biggest mistakes that an entrepreneur can make in their lean startup is assuming that they know better and that the numbers must be lying. In most cases, the metrics are completely accurate and the owner is merely presuming more than they should.
5. Go free whenever you can. In many cases, there are free or very low cost options to services that many entrepreneurs pay for. Instead of buying ad space, drive traffic to your site with nontraditional advertising such as link exchanges and social networking. Because shelling out a single cent, ask yourself if you will get your money’s worth and whether there is a cheaper way to get the same result.