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What is a Lean Business Model and How Can it Help You?

What is a Lean Business Model and How Can it Help You?

A lean business model is a “buzzword” that has been floating around the internet for quite some time now. With multiple startups now using a lean business model and growing rapidly, many traditional and small businesses are starting to wonder “can I do this too?” Well yes, but also no. Let’s explain.

What is a lean business model?

A lean business model is one that prides itself on putting customers first and cutting as much unnecessary waste as possible. It’s a common tactic in the start-up world as many companies sell a piece of software or application. The company then “pivots” their software or goods based on customer feedback, improving on customer retention and continually making necessary improvements.

Company operations are kept small, and little investments may be needed to run the business. According to Gazprom Energy, a lean business model “…means making continuous improvements in a business operation, and the implementation of processes to guarantee optimum business efficiency.” In theory, a lean organization would continuously improve on their product to benefit the consumer.

Well duh.

It goes much further than that. The goal is that you want to keep your business costs as low as possible as well. Essentially, you carve out a section of the market and continuously improve within. It’s important that you introduce new products, software, and procedures that are going to enhance the customer experience. Using a lean business model for your small business may be a bit trickier when you are a mechanic, versus a software engineer. However, there are 4 major tenets of the lean business model you can implement right now:

  1. Cut waste
  2. Collect data
  3. Improve customer service
  4. Innovate and pivot

Cut waste

Cutting waste in terms of hours worked, equipment needed, and services offered can immediately impact your bottom line. Find what your business does really well or who your biggest customers are and lean heavily into their favor.

Even small businesses have to cut waste in order to compete with corporations like Amazon. The key is to cut costs and services without cutting value.

Collect data

There are key data points you should be tracking when it comes to your business. Metrics like:

  • Time of each service
  • Cost of each service
  • Where are your customers finding you? (i.e. Facebook, your website, Instagram)
  • How long does it take for a customer to make a purchase?
  • What is your biggest moneymaker?
  • Who is your target audience?
  • How satisfied are your customers with your service?

Knowing stats like these can help you determine how to find your target market and double down on it. Not only that, but it can show you where you need to make improvements. Having a digital presence creates multiple opportunities for your business to pursue money and collect data. Effective email marketing can be great for collecting data and building a loyal customer base.

Improve customer service

The lean business model relies heavily on robust customer service and it’s no secret why. When you have few costs and products to sell, every customer counts. 

You don’t need a mobile app if you are a small business. You don’t need the biggest online presence, although it could help. 

What you do need to find out is what your customers value most about your products and services. Give customers incentives to fill out surveys that will show you:

  • What you are doing well.
  • What you are doing wrong.
  • How you can improve your products.
  • Other areas they would like to see improvements.

Innovate and pivot

Now that you have the data about your customers and your business, you need to change. Lean into your strengths and cut services where you lose money or don’t contribute to the overall customer experience.

Always be looking for ways to improve your business and diversify it. Ask your customers what they would like to see come from you next and they will tell you. If you are to use the lean business model you will need to constantly be improving in order to grow. Don’t let your business fail because you can’t adjust to customers. Know exactly what they want and how they want your service or product.

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