Last month I discussed how it’s important to look after the companies needs before evaluating an investor. Clearly, in my view, investors are a maze to be navigated – but, you might ask, what’s the alternative? The alternative could be, bootstrapping and staying lean.
Eric Ries coined the term “Lean Start-up” way back in 2011 with his book The Lean Start-up. The core idea is to be efficient. This means, know when to spend, what to spend on and how to use customer feedback effectively. Bootstrapping is essentially funding your own businesses without investors. However, in a practical sense, this usually entails some small amount of money from friends and family.
I’m certain you can see how being lean and bootstrapped could be a perfect way to start up. It certainly seems that way. However, like everything else, the ideas need to be understood and implemented accurately. The concepts are not as simple as they seem.
The underlying premise of both bootstrapping and a lean start-up is to conserve and be cautious with resources – that means time and money.
Time it right – make it perfect later
When I started my first as an Analyst at a global investment bank, my superior gave me a sound piece of advice – “the first deliverable doesn’t have to be perfect. It has to be on time”. Golden words that have a pretty wide scope of implementation. The Lean Start-up is based on a similar idea – the first product you develop has to be a minimum viable product (MVP) – not a perfect product. Ince you have the basic version out, use customer feedback to iron out the imperfections. The alternative is to spend a lot of time (and money usually) to create what you think is a perfect product. The customer may or may not agree.
Customer is King, Queen and all their subjects
Customer feedback and product validation is at the centre of any successful strategy. If you don’t have the luxury of resources, you need to pitch your ideas to someone. Choose to pitch to your customers. Show them what your planning. Early adopters will guide your future changes. It may be a much more efficient way to go to market. Scale and investment need customer validation. You don’t really need a lot of users to validate your product at a small scale. A few good customers can be equally powerful.
Lean and cheap are not synonyms
Being lean is often considered the same as “not spending”. However, as we all know, you have to spend money to make money. The idea of being lean is more about being efficient in what you spend on. It’s about being cheaper and faster than the alternative. You will need to spend in times of trouble and at critical junctures. However, choose wisely and spend to relieve pain. Don’t spend in anticipation of pain – wait till its uncomfortable.
Businesses are set up with the ultimate aim of making money. Since it takes money to make money, the tendency is to either get investors or to bootstrap and hardly spend. Both of these are extremes. Efficient use of resources and a customer feedback driven product – that’s the core of being lean. There are no real magic wands in life, but if there were ever a way to increase the odds, a lean approach could be the answer.
This article was originally published in Bahrain This Month's September 2022 issue.