Lean Startup Naija Style – How To Start A Business With Almost No Cash

The book The Lean Startup by Eric Ries was a breath of fresh air in the midst of the volumes of business books that already existed. The central theme of the book was challenging the way entrepreneurs approach business.

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Eric was pushing the idea that entrepreneurs spend too much time planning and less time doing. He thought entrepreneurs make several (and most of the time, costly) mistakes in the process of building their product or service. Entrepreneurs sit in boardrooms and make decisions that should otherwise have been taken in the marketplace.

The Lean Startup introduced the minimum variable product (MVP) concept. Like the atom being the smallest building block of life, the MVP is the form your product or service can be introduced into the market. The MVP is not a fully done or completely thought-through concept, but it exists in a usable form that allows the entrepreneur to take it to the marketplace; then, based on real-time marketplace feedback, he continues to tweak the product to make it more valuable to the costumers.

Lean startup, in simple speak, is starting a business with the least resources possible – cash, human, material, etc. I have started a few businesses and helped others start businesses as well and many people have the wrong mindset or approach to starting a business.

Many think that they need a lot of money to start up the business of their choice and my mantra is simple: everything potentially big business can be started in a small way. There’s a mindset one needs to adopt when starting with little resources and that is what this write-up is about.

What’s not important when starting a business

Before I tell you what is important, I will tell you what isn’t. You don’t need an office space to start up a business. What if my customers want to come and see me? Maybe 10% of your customers would fancy coming to see you. If you still think an office address is a must, get a virtual office address or get permission or pay a token to use a family or friend’s business address in a business district. In a worst-case scenario, use your house address. But please believe me when I tell you an office space isn’t important for starters. You also don’t need an office car to start a business.

Logos and branding

I know someone who for six months didn’t commence business operations because he was trying to get the right logos. Seriously? Brand identity is overrated for start-ups. Most of the big brands we know today rebranded after they hit some level of success. When you become successful, you can worry about your looks.

Vision and mission statement

Again, this is important but when starting out, it’s okay if the vision in your head is what drives you. Skip wasting time and money putting this in a well-framed plaque hanging on the wall in an office space you also really don’t need.

Staff

You hire people to do work. You don’t hire people in anticipation to do work. Start with as few people as possible. Thirty days go by very quickly when you are the one paying salaries. The rule of thumb is to be wary of everything that depletes your cash flow but has little or no impact on your goals.

Also, be wary of activities that push your launch date forward but does not impact the following things that are important.

What is important when starting a business

Business plan

It doesn’t need to be an elaborate document. You could use its cousin – the business model canvas. The plan is your guide. In the same way, a pilot won’t be allowed to fly without a flight plan, you shouldn’t start your business without a business plan.

Selling plan

How, beyond the five people who have been telling you they will buy your product, will you attract customers? Don’t assume your product is good, that people will buy. How do you plan to attract customers? Why should they buy from you? What is different about your offering? Are you differentiating based on cost, value or both? How do you communicate that to your customers? Is your product a one-off purchase or is it recurring? What is the frequency of purchase? How many units do you need to sell? What happens if you don’t sell that many?

Operational plan

How will you deliver your product or service? How do you source your inputs? Where do you source from? What is your service turnaround time? How can you optimise? Do you use a recipe? Is it documented? If you are out of the picture, can anyone else run your operations?

Budget

Have your expenses been documented? What is the plan for sticking to it? What are your sales projections? Is there a contingency should you not meet your numbers? What are the underlying assumptions? Do you have negative cash flow? Can you buffer it? What is the funding plan, debt, equity or personal savings? What happens when you don’t get any?

When you employ lean startup methodology, you will do the important things. Notice that the things that are important don’t cost money. I hear people say they can’t start a business because they don’t have capital. It is true they don’t have capital because they think of capital as money only. What they lack is mental capital. Capital for entrepreneurs comes in five variants – financial capital, educational capital, reputational capital, relationship and mental capital.

But that’s a separate discussion we have already discussed here.

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