Recently, it was revealed that Snapchat has raised another $1.8 billion in funding bringing the startup's value up to almost $20 billion. For entrepreneurs everywhere, this news is validation that the dream is possible -- that with the right idea, a company can grow bigger than anyone ever imagined.
But the fact of the matter is that Snapchat is an anomaly. A 2015 report from Sage found that two out of every five startups fail. And one of the top reasons is being founded by entrepreneurs who don't watch costs closely enough.
Running a startup is expensive, which is why even wildly successful companies like Snapchat still need influxes of cash. But, it takes a while to get to that level. Startups need to do whatever they can to stretch their resources. That means adopting a lean business model, which focuses on getting your startup launched soon and in a manner that requires less initial capital.
Having a lean enterprise means knowing how to cut the wheat from the chaff. However, that doesn't always come naturally.
Here are four ways to make your startup leaner:
1. Make decisions quickly
Time is money. By taking substantial amounts of time to make decisions you're holding your company back. Every option you consider, every time you weigh the pros and cons, the startup isn't moving forward.
That's not to say you should just flip a coin whenever faced with an important choice, but you need to realize that you'll never have all of the information you need. All you can do is process the information you have and pull the trigger.
And if every decision has to go through the founder, CEO, and each investor, it'll be a big waste of resources.Have a plan in place about the chain of command whenever a certain type of issue arises. Know who's responsible for what choices and the criteria that will be used to evaluate options.
2. Know what can wait
Many entrepreneurs make the mistake of thinking everything has to be perfect by the launch date. The product has to have every possible feature and every potential issue has to be figured out. It's more important to nail down the basics and get the business running as soon as possible.
For example, say you've developed an idea for the Uber of dog-walkers. You get caught up at the office and need someone to go let your pooch out. Sure there are other features that could be added to make the service more interesting like grooming or training, but they don't need to be ready to go from day one. Adding all those extra parts will just take more time and money and keep pushing back the date when you can actually start making sales.
Decide what the core of your business is. Focus on getting that off the ground and when you become more financially stable you can develop further and make improvements.
3. Constantly run tests
If you're waiting until your launch date to see if there's a market need for your startup, you're setting yourself up to fail. If no one buys into your company or its product, everything you've done up to that point is lost.
The better option is conduct smaller tests throughout development in order ensure you have an end result that there's actually a market for. For example, at Coplex, we take the time to experiment with our clients to collect data about what parts of their ideas work and which don't. We may end up developing something completely different from what we originally imagined, but it's much more likely to be a success.
4. Think twice before hiring
Once your company begins to grow, you have to hire more employees to handle the load. And since startup companies are always evolving, chances are the types of employees you needed at the beginning won't be the same as the ones you need in six months or a year. So you bring on even more employees. Next thing you know your payroll budget is out of control.
A 2015 First Round survey found, 68 percent of startups planned on hiring as many as 20 people over the course of that year. But you have to wonder how many of those hires were actually necessary. Were there enough new duties and responsibilities to create a whole new position? Did no one else on the team possess the skills needed to do the task? Could it have been done by a temporary contractor? Ask yourself those questions before hiring and you'll know if a new employee is really the best way to go.
Startups are expensive and unless they're run properly they will bleed money. As an entrepreneur the best thing you can do is have a lean enterprise that allows you to allocate your resources in the best way possible.
What are some other ways to make a startup leaner? Share in the comments below!