If there’s one thing the Japanese know a lot about, it’s effective car production. And that’s where the term “Lean” comes from. It all began at Toyota, when the car manufacturer found a new, more efficient method of producing cars. The principles learned at Toyota became known as Lean, and they are now more of a management philosophy that can be applied to almost any business.
At its core is the principle of creating value by reducing unnecessary risk and waste. More recently the term has become synonymous with start-ups, thanks to Eric Ries and his Lean Startup movement.
So what makes Lean lean?
OK, so how do I apply it?
Learn about your customers
A key component of Lean – customer development – is a method to help you find ‘product-market fit’, with the aim of delivering a product that people love. The best way of doing this is through interviews with prospective customers, conducting surveys, landings pages with email sign-up forms and demos to test various aspects of the business model (eg pricing, positioning, segments, and so on).
Build something to show them
Create your ‘minimum viable product’ (or MVP in Lean Startup jargon), which is the first version of your product that will enable you to learn the most. Perform regular testing with users, iterate and improve as you go. Make changes when there’s less risk and when you’re not too precious about what you’ve created.
Measure the response
Focus on metrics that really matter such as sign-up conversions, payments, referrals, returning visits and NOT vanity metrics such as total number of hits.
Rinse and repeat
Keep learning, building and measuring. It’s this feedback loop that ensures you get to where you want to be.
Some useful tools to help with running your Lean projects can be found here.
Lean in practice
We work with many start-ups and often get approached by entrepreneurs with a great idea, however, more often than not they have no validation to show that theirs could be a successful product or scalable business. It can be a painful lesson for many, that after spending lots of time, energy and cash – there's simply no demand for what they've built.
Our approach at Spook Studio involves exploring all aspects of our clients’ business models to ensure that we test out ideas at an early stage where there’s less at stake, which helps to reduce risk, create value and ultimately a better return on investment.
Now it's over to you...
1 Plan your marketing
Far too often, new businesses take a scattergun approach to marketing. They spend a huge amount of time and focus on marketing – which is correct – but there is no cohesive strategy, plan or thinking. So what happens is, 80 per cent of their marketing efforts results in little or no return.
If you have done your homework, you will be clear about how you help your target market with their ‘pain’, know where your target market hang out and how best to get your message to them. Use this knowledge to plan your marketing, so you focus your marketing on your target market, in a place where they will see it – and in a way that will encourage them to take action.
If you believe that word-of-mouth is going to be all the marketing you need, think again. Word-of-mouth works very well when you are an established business with a good name. Until you are an established business, word-of-mouth, in isolation, will not be an efficient marketing strategy.
Think very carefully about taking an enhanced listing in a physical or internet directory. When was the last time you looked in one of these for a tradesperson or supplier?
2 Know your costs
I’m going to be blunt. If you don’t know the cost of running your business, it normally means you are running your business as a hobby. Poor financial management of a new business is one of the main reasons for a new business to fail in its first year. Poor cashflow is a major factor in this. If you sell to businesses, see how short you can make your payment terms. For example, can you ask for some cash up front?
3 Look for recurring business opportunities
At the start of your business life, most of your business will have to be won from new clients. Winning business from existing clients is estimated to be between seven and 14 times easier than winning business from a new client. Aim to target new business from clients or customers that are likely to result in recurring business.
4 Be flexible
No one can predict exactly how your new business is going to perform. In the first 12 months of trading, you will probably need to tweak part of your business and marketing strategy. If you keep yourself open to opportunities and possibilities, you are more likely to be able to change strategy before it costs you time and money.
5 Work to your personal talents and strengths
In the early days as a one-man-band, you are going to have to be all things to all people. There are always going to be tasks that don’t fit your personal preferences. For me, this was bookkeeping. Be honest with yourself and outsource or delegate any tasks that can be done by someone else, without materially affecting the running of the business.
6 Set and write down business goals
Only about 3 per cent of adults have clear, written goals. These people accomplish five to ten times as much as people of equal ability and standing, but who, have never taken the time to write out exactly what they want to achieve. It’s the same with new businesses. Those businesses that remain focused on their goals are more likely to achieve greater things. In the early days, you are on a steep learning curve, so you will need to revisit these business goals every three months.
Outsourcing makes sense in a downturn because…
No company can escape the current financial downturn that’s affecting the global economy. Europe has slipped into a recession and the United Kingdom may shortly follow suit. In order to make the most of these tough times, many companies are looking to outsourcing specialists to provide much needed specialist support to maximise their efficiency and ensure their long-term survival?
Outsourcing is not a new phenomenon; it’s a tried and tested model. In the early part of this decade there was an economic slow down. During this time, outsourcing companies found more than ever that they were able to assist and support other businesses in times of trouble. Some companies are cautious about outsourcing in the current financial climate, mistakenly assuming it means an additional expense, but there are many reasons why outsourcing makes sense in a downturn, and here’s 10 of them:
ONE: You can cut costs without cutting corners. Outsourcing allows you to provide the same level of provision to your customers or clients without having to compromise or cut back on the quality of experience/service they receive. At the same time, because some core costs are reduced such as equipment, advertising and recruitment – you maintain your standards whilst reducing your costs. This will have a positive effect on your bottom line. If you’re in danger of dropping the level or standard of service that you offer your clients, you are in danger of losing those clients to your competition. Don’t even consider cutting corners – you can’t bounce back from this without the support of your clients/customers.
TWO: You can focus on your core concerns, the things that you are best at. Outsourcing is not just about saving financial cost implications, but also saving time and allowing you to focus on your core business issues. If the downturn has made you feel that there are no longer enough hours in the day, (were there ever?) then you’ll know that outsourcing could free up more time for you and your staff to spend on the central and fundamental concerns of the business. Decide upon which activities require your greatest focus and efforts, and free up your time by outsourcing the rest.
THREE: You may need to lose staff, but you don’t have to lose your shirt! There may be a need for redundancy, or saying goodbye to casual, temporary or part time workers. Outsourcing can cost you less than the cost of retaining those non-business critical staff/employees. You are doing this to safeguard your present full time employees, but it may be frustrating to see them go because you don’t know what’s around the next corner. When you outsource, your business remains effective, despite the reduction in numbers. If you’re ever to return your business to its pre-credit crunch glory, you may need to outsource to secure your current employee’s future.
FOUR: You can more efficiently manage your Human Resources. During this downturn, you may need 100 telemarketers for one campaign but only 10 for the next. Regularly, you’d have your remaining staff draining your budget. When you outsource, you can add or reduce your staff as and when you need them. By reducing some of your fixed operating costs you can deliver greater economic freedom to your company. With completely flexible staff numbers you can increase or decrease the workforce to whatever size you need to meet your current challenges.
FIVE: You can change horses midstream. When you outsource your needs, you can make amendments immediately, make a decision, change your mind, improve equipment, increase staff, decrease equipment – do whatever it takes, whenever necessary to keep your business afloat. Your outsourcing contract should be flexible enough to make a decision immediately in order to respond to necessary demands.
SIX: You can outsource many more services than you realise. Payroll, Sales, Marketing, Secretarial, Reception, IT, Lead Generation, Telesales and Telemarketing are among the many services that could all help you cut your short to medium term costs in a downturn. Telemarketing and Sales are particularly important. To effectively see your way through this economic nightmare, you need to bring in business – whether it is from new or existing customers/clients, you must increase sales and reduce costs in order to sail safely through this financial storm. Outsourcing can be used to achieve both of these goals.
SEVEN: Outsourcing is targeted professional activity. You can only go on losing money for so long before your business will start to collapse, so take action now! Whatever cuts you are going to make, you need to make them with the full knowledge that they are best for the future of the company. Outsourcing allows businesses to take proactive steps to maintain their status and trading capacity during difficult times.
EIGHT: Outsourcing can protect your company culture and staff morale. You shouldn’t force your existing staff to do more work for the same wages but without outsourcing, you may have to do it. It’s bound to happen if you have to reduce your staff numbers. As your workforce decreases, you still need the same tasks completed. Asking your current staff to take on these additional roles and tasks may cause problems in the workplace. You should expect an increase in the number of sick days, a decrease in general morale and this can affect your company’s productivity at a time when it matters most. Outsource before you drive your staff into early retirement.
NINE: Outsourcing helps you do more of what you do well. If your business isn’t badly affected by the downturn, you need to make hay while the sun shines! You’re lucky, you’re in one of those areas that people cannot do without, you’re a niche or a necessity, and perhaps you’re making even more money. Outsourcing can help you respond to the increased need for your product or service and allow you the room to do this without increasing your fixed operating costs.
TEN: Model other successful organisations. As the credit crunch takes a bite out of British commerce and despite the evident slow down in the economy and the threat of recession, billions of pounds in outsourcing deals are being agreed in the UK. If other companies are taking advantage of the benefits of outsourcing, then your business should be considering it too. Don’t be the last to realise that outsourcing solutions could save your business before it’s too late.
For expert advice on outsourcing your business needs, speak to a representative at VSL, the downturn doesn’t have to be a disaster for your business.
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