Running a startup is a wild ride – but in today's economy, as investors and business owners stress over a potential recession – it's more important than ever to keep things lean. VCs might not be throwing money around like they used to, but that doesn't mean you can't grow your business and access the funding you need to make it happen. It's time to get back to basics, focus on your growth plan, and take advantage of green shoots of opportunity. So saddle up, startup founders, and let's get lean and mean.
Here’s a high-profile example of how running a lean business can pay off. After the impacts of COVID-19 left Virgin Australia on the brink of collapse, the business was sold into private equity and delisted from the ASX. They sacked 3,000 staff, axed their sub-brand Tigerair and cut loss-making routes, repositioning themselves as a mid-market player. The result? In early Feb 2023, the business offered equity to management at $2.10 a share , doubling its internal valuation since the previous equity offering.
Staggeringly, after posting a $386.7m loss in Sept 2021, Virgin is on track to record a profit margin of roughly 5%. According to CEO Jayne Hrdlicka, the results reflect the progress made in “rebuilding financial resilience”. Pretty impressive stuff in the current market!
Lean Business Tips for Startups and Small Businesses
You might not be running Virgin Australia, but as a startup founder or small business owner, there are lessons to be learnt from Virgin's lean approach, such as prioritising strategic decision-making to achieve success even in challenging economic climates. Here are some tips for running a lean business:
Know the Cash Cycle of Your Business
Understanding how easily you can convert sales into cash, minimise outflows and reduce the time your working capital is tied up will mean your business is less reliant on external funding sources. This is critical in a market where rising interest rates prevail and investor dollars are harder to come by. Once you understand the cash cycle of your business, you’ve earnt the right to grow.
Be Clear on Growth
In uncertain times, it's important to have a clear plan for growth and build a business that is resilient in all market conditions. By focusing on your core business and getting back to basics, you’ll create the foundation to capitalise on new opportunities when others inevitably can’t compete or fail.
Use Data to Make Informed Decisions
In order to run a lean business, it's important to have a clear understanding of your finances and operations. Ensure you have a solid process for determining how the business is performing (success isn’t just measured by how much cash is in the bank). Amplify your understanding through the use of data to identify areas for improvement and make informed decisions about where to invest your resources. This can be achieved by implementing business intelligence tools like PowerBI or considering the use of cash flow forecasting apps such as Float.
Use Money Well
With investment appetite low, it's more important than ever to use your money wisely. Prioritise strategic investments that will help you grow your business, and look for cost-saving measures that can help you operate more efficiently and increase your profit margins. Just like Virgin!
Get in Touch With Our Expert Business Advisors
By focusing on these tips, you can run a lean business that is well-positioned for success, even in uncertain times. Remember, getting through this period is all about staying agile, making informed decisions, and staying true to your core business principles. If the road on your business adventure is getting a little rocky, get in touch with one of our business advisors for a chat about how we can help.
