How to Run a Lean and Profitable Small Business

Staying lean in business means having everything you need and nothing you don’t.


In many ways, “stay lean” has become the new lifestyle motto. People everywhere are trying to stay lean through diet, exercise or banishing meaningless possessions. There’s a reason the “stay lean movement” is so popular. It’s healthier and more efficient, and it provides the space for meaningful growth. Why should businesses be any different?

They’re not.

Staying lean in business means having everything you need and nothing you don’t. It requires examination and retooling to find (and wipe out) inefficiencies. Lean is a never-ending process, not something to achieve once and expect to continue. Lean might seem like the opposite of growth and expansion, but the reality is that the two can work quite well together.

 

Benefits and Pitfalls of Expansion

I believe in creating a narrow focus with your business, especially when you are starting out. It’s important for a business to find solid footing before moving onto new things. However, once a company is established and its core offerings are profitable, it makes sense to stretch a little.

Diversifying business offerings — in the same way an investor diversifies a portfolio — helps increase reach and revenue potential, while decreasing the risk of a single revenue stream. Unfortunately, expansion comes with its own set of risks.

Diversifying your offerings across multiple services means that a bad month or two in one area won’t sink your business. But don’t neglect your cash cow! Paying too much attention to new areas at the expense of the core services that made you successful can be a fatal mistake.

 

The Danger Zone of Expansion

When expanding beyond core products and services, growth can easily become bloated. It can take the form of unnecessary meetings and slower processes, as multiple layers of management try to report up and send requests down inefficient — and perhaps unnecessary — command chains. We see a similar pattern in software development in the form of unneeded complexity and technical debt.

Google’s defunct Wave product (a real-time messaging platform) is a prime example of “bloat” sinking the ship. They built a groundbreaking product, but because it was so heavy with features, making changes became a slow and agonizing process. As a result, it was plagued with speed issues and bugs. Even a software giant like Google was unable to recover. Had Wave launched as a smaller, leaner offering, I believe the results would have been very different.

 

How to Get Lean in Business

Contrary to popular belief, you can get lean while expanding beyond your core product or service. However, it requires an open mind, an attitude of experimentation, and a goal to maintain efficiency. If you find that your company feels like it’s bogged down, here are three ways to get lean quickly:

  • Be ruthless. Nothing is sacred. Every process should be analyzed to see if it’s the most efficient option. Poor-performing processes need to be replaced or eliminated.
  • Take a bottom-up approach. It’s hard to become lean from the top down. Improving efficiency starts at the front-line. Allow outward-facing staff members’ ideas to flow up the chain.
  • Empower employees. Give up control and empower employees to change processes that aren’t efficient. You’ll be surprised by the results.

Maintaining a lean, expanding organization is a balancing act that requires constant attention. You must grow, but only as much as is necessary, while not diverting too much attention from your core services. If you focus and commit, you will be rewarded with an efficient business with new strengths, diversified offerings, less risk, and a healthy bottom line.

 

Peter Baumgartner is the founder of full-service Web studio Lincoln Loop, makers of Ginger, an online platform to help distributed teams communicate. Peter is an expert in Django-based Web development and a thought leader in entrepreneurship and remote teamwork. He welcomes anyone to reach out to him on Twitter or Google+.

 

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