Starting a business is not an easy task. It requires a lot of hard work, dedication, sleepless nights, caffeine, patience, guts, perseverance, and did I mention sleepless nights? Despite that, the reward of your business becoming successful is well worth all the blood, sweat, and tears that you had to put in - especially if your business serves a social mission. Aside from all of the sweat equity that has to go into a new Startup, one of the key ingredients to success is staying lean.
"What is a lean startup?" you may ask. It is a scientific methodology of running a business that builds a product or service that meets the needs of customers in such a way that the business doesn't require a large amount of money to be successful. If we use this same methodology to run our household finances, then our odds of success increase exponentially. The following are five ways to manage your finances like a successful startup.
1. Rely on the Numbers
Running a lean startup goes beyond the opinion of what you think works or theories of what could work and instead relies on evidence. You test your product or service in small capacities, and you observe how it is received by the outside world. This allows you to know in real time what works and what doesn't. Once you have proven your concept, you can now begin to scale your business. As it relates to your household finances, it is important to rely on the numbers instead of opinions and theories. Instead of guessing about where your money is going, where it is being spent, etc., use a budget worksheet to know exactly where your money is being allocated. Once you observe and identify your spending, you can begin to scale your finances to focus on items that matter most.
2. Fail as Fast as Possible
Failure isn't failure when you fail, instead it becomes failure when you give up. Using the lean startup methodology, the sooner you can figure out (at a small scale) what doesn't work in your business, the better off you'll be. This allows you to weed out all of the possible losing scenarios until you are left with the winner. This can translate into your personal finances because as a household you may be dealing with multiple money personalities or old money messages that no longer serve you. As you fail as fast as possible, you will realize what parts of your money management techniques you have to tweak or get rid of. The faster you can make that happen, the sooner you can begin to enjoy your financial freedom.
3. Make It a Team Effort
The lean startup approach is never just about the executives in the C-suite. Instead, it involves everyone including the janitor and the mailperson. When all of your employees are invested in the success of the company, then everyone will do their part to achieve the goals that are set forth. There is never an attitude of "this is not my job" because everyone understands the cliché that says, "It takes teamwork to make the dream work." When you transfer this attitude into your household finances, it allows you to manage your money successfully because you are involving everyone who can potentially play a role. Whether it's your significant other, family, or friends, involving them in your financial goals will help steer them away from distracting you in a different direction.
4. Hire Slow, Train Fast
In the book From Good to Great, Jim Collins talks about getting the right people into the right seats on the bus, which means you must make sure that you have the right employees in the right positions in order for your business to get to the next level. This is also true when running a lean startup. Instead of hiring outside help, a lean startup will access its current talent pool and figure out who it can cross-train for any necessary vacant positions. This can be applied to your finances by making sure that before you hire help and dish out any money, you see if what needs to be done can be done in-house or learned by someone. More tangible examples are dry cleaning vs. laundry and eating out vs. cooking. Both former examples produce added costs, while the latter can be accomplished at a fraction of the cost. Adopting this mentality can truly decrease discretionary spending, which can leave more cash for savings or retirement.
5. Communicate Often
Lastly, communication can be extremely helpful as you run your household finances like a successful startup. In any successful business, there are often quarterly, monthly, weekly, and even daily meetings to ensure that everyone stays on the same page. It isn't possible for a startup to run efficiently and lean if some people are going right and others are going left. Everyone should be marching to the same beat. This also rings true when it comes to your personal finances. Are you married and practicing financial monogamy? Do you have children? What about a boyfriend or girlfriend? Or a roommate? No matter what your situation is, communicating on a consistent basis with anyone who is involved with the finances is imperative. Having a weekly or monthly budget meeting is ideal, but in the same breath, everyone should be on the same page around financial goals and aspirations. Once you move as one, you can begin to financially win as one. As I said earlier - teamwork makes the dream work!
Luvleen Sidhu is the president, cofounder, and chief strategy officer at BankMobile, the largest and fastest growing digital bank in the country helping the underbanked, millennials, and middle-income Americans have an affordable, effortless, and financially empowering banking experience.