Lean budgeting entails coming up with ways to develop a sustainable financial framework that fosters innovation, growth & opportunities for and in a business. Discipline, comprehensive understanding of your business & commitment to business goals are central to effectively running a business on a lean budget. It’s also important to point out that in the pursuit of keeping costs at bay, caution must be taken to ensure there are no negative effects on the business and people involved.
Most businesses fail because at some point they run out of cash & this is one of the most significant causes of business demises. Take note of the following tips on running a business on a lean budget.
Migrate From Brick & Mortar Facilities
It’s usually the case that buying or renting buildings or spaces for business operations is very expensive. There are alternatives to adopt such as operating from home or going virtual. Don’t be misled by the egocentric mindset of wanting to appear flashy or mighty by operating from high-end facilities. Taking a business online offers flexibility for the entrepreneur & the consumer, whilst involving increased consumer reach & very low overhead costs. Setting up an online business entails much less investment risk yet allowing one to reach more prospective consumers. The ultimate result is a significant reduction in operating costs thus conforming to the lean budget.
Keep Staff at A Minimum
In business never fall prey to the illusion that more staff means increased productivity. Keeping a small staff that effectively multitasks can actually enhance productivity at reasonably lower costs. It’s of course important to ensure that workloads are properly managed to avoid burnout. There are also so many business operations that can be done by outsourcing or automating rather than keeping full-time employees.
What this essentially means is that you will get a significant portion of the production costs from the actual consumers. You won’t have the burden of sourcing funds for production costs from elsewhere (which might be expensive). You will have to be creative to come up with low-cost incentives, promotions or value-added services that will lure consumers to pay for products/services in advance.
Cost-Cutting Must Be the Order of the Day
You must see to it that you streamline. You do this by evaluating your cash flows and taking note of recurring costs. After noting those recurring costs, either you cut off some of them or you explore cheaper alternatives to cater for those costs. For instance, using a virtual assistant is way cheaper than having a full-time employee. By the way, a virtual assistant is someone who offers one’s services or specialized expertise online to anyone requiring help in issues pertaining to any field.
Adopt Cost-free Or Cheaper Marketing Initiatives
This point is necessitated by the fact that marketing/advertising is considered a pivotal aspect of a business that requires lots of financial input. Therefore, when operating on a lean budget one refrains from injecting significant amounts of money into marketing so as to conform to the lean budget. However, there are two main cost-free or relatively cheaper marketing endeavours which are, using word-of-mouth & social media (these two are symbiotic). One can effectively market products or services on social media platforms and thus spreading product/service awareness cheaply & much more broadly.
Run The Business Organically
Move away from venture capitalists, financiers or borrowing money to finance the business. Making yourself responsible for someone else’s money whilst running a tight ship is very risky. You must make sure you use money you can bear sole & absolute responsibility for without hurting or involving other people. In principle, just ensure that the business yields profit on its own merit. Revenue generated within the business should circulate with the business and finance every aspect of the business.
Make Decisions Based On Cash Flows
Richard Branson once said and I quote, “Never take your eyes off the cash flow because it’s the lifeblood of business”. This is even more imperatively critical when the budget is lean. Every decision you make mustn’t be random and haphazard; every decision must be based on cash flow considerations. Every time you take a closer look at the cash flows before making decisions you’ll always make right & informed decisions. It’s also important to know your break-even point. Break-even point is the amount of money you need to keep the business afloat without making a profit. Ensure that you never go past this point in the negative direction as this will have disastrous consequences; always keep your eyes on the cash flows!
Automate & Virtualize
The main thrust of this is to remove the need to employ full-time staff to do certain things. Due to the rising dominance of technological innovations there are now things you can do by use of cheaply accessible software or digital platforms that, in the majority of cases, you don’t even have to purchase outright. Most of them you can access online & will do things for you automatically without even needing any human aid. Things like, for instance, scheduling of meetings/appointments, emailing lists, e-commerce, file sharing etc., can be done automatically or virtually. This greatly reduces overhead costs and upholds sustainable running of the business within the confines of a lean budget.
Hire Student Interns
It is a well-known fact that a lot of students struggle to get places of internship in the country. As a business you can leverage on this to lessen costs of hiring qualified staff. Students tend to be heads with hearts (very passionate) & so driven. Plus they usually wield the latest skills and abilities whilst being tech-savvy. You can cater for their transport costs & offer them reasonable allowances which will be way cheaper than hiring full-time qualified staff. All in all, you will stand to actually benefit more by getting increased productivity in your business.