When a business receives investment capital, the injection gives it an opportunity to develop a potentially lucrative proposition. It is able to get the ball rolling to develop that product, set up an infrastructure or expand into markets. Often enough too the capital runs dry short of achieving the objectives, at times, missing targets by a wide margin. The possible reasons for this are, firstly, there could a lack of depth and detail when developing initial cost projections. Secondly, cash outlays had not been well-managed and tagged against project milestones. Thirdly, insufficient thought and effort had been allocated for planning. Lastly, the greatest misconception of small businesses and startups is that the act of “running a business” does not yet occur during the pre-revenue and developmental stages. In fact, it is when teams “put their heads down” too heavily on the innovation that ultimately, places them at risk of getting de-focused on the direction. Applying the principles of business operations process management is as vital for large corporations as it is for small businesses to remain vigilant on expenditures as measured against progress, ROIs, performance KPIs, market requirements and their impact on future product success and profitability.

• Investors’ Advice to Startups in Lean Times

Regardless of size and revenue, businesses are constantly faced with bills to pay for rent, salaries, suppliers, inventory, professional fees, advertising, equipment purchase and maintenance, delivery and administration costs. Although the matter of receivables and profits do not arise at the pre-revenue and developmental stage, the issue of expenditure accountability and justification of deliverables is no less mandatory during this phase. Here are some tips on how to maximise value on every penny expended:

Research on and negotiate the best deals possible

Whether it is dealing with space rentals, equipment leasing or product design services, never hesitate to haggle to obtain the best possible advantage. However, bargains cannot be struck without first having a thorough knowledge of the going market rates, available expertise, customary deliverables, prevailing business practices and the standard value-add options normally offered. There is no better way to do this than to conduct comprehensive research, including performing data comparisons. Price points are not the only considerations when negotiating. The entire process from purchasing, phased delivery schedules, communication, support, payment schemes and credit terms should be factored in. For example, the longer the terms of payment the better it is for a business. Be bold to discuss possible discounts on bulk purchases or early payments. Where suppliers may charge higher premiums for guaranteed support, explore the possibilities of this support being a complementary add-on for long-term contracts. Always revisit existing purchases regularly to work out better deals with suppliers, especially where there may be incremental opportunities in future.

Implement good project management

“Good project management discipline stopped us from spending on projects that fail”, states Ron Kasabian, general manager at Intel, USA (PMI). Disciplined project management breaks strategic vision down into its elemental objectives and sets a roadmap towards achieving them successfully. It is a means of identifying the sequence of activities and the range of resources indispensable to a project such as people, systems, space, budget and time. All of these resources interoperate within a planned undertaking that places the specific and unique outcomes within view, and subject to constant evaluation. Defining the project budget is vital in steering expenditure into agreed efforts that have been validated to produce the required outcome. A well-estimated budget helps to structure the scope of the project in a way that controls how resources and time are allocated to any individual task. In a disciplined project management, the budget should be agreed and signed-off at the start of a project. It should be subjected to regular formal reviews to assess budget changes and impact, as well as to measure the returns on outlays and stop injections into non-value-add activities. Most importantly, taking a disciplined approach to project management not only increases project accountability, but also ensures visibility of progress as well as future requirements that will influence purchasing.

Be clear about product and project specifications

This is the essential mantra that underpins quality management and good manufacturing practice systems. Establishing good documentation of product and project specifications ensure that design requirements have been formalised and agreed. It ensures clarity of requirements and inputs when communicating with sub-contractors and suppliers, outputs are adequate for verification, and testing results meet expectations. In so doing, it also provides assurance for more accurate cost estimations from suppliers and exact budget allocations for a project. Errors and miscommunication can be eliminated, and there is more certainty for having things done right the first time. This would lead to minimising outlays on corrections and re-working. Documenting specifications should include details on materials, dimensions, measurements, tolerance/clearance, acceptance criteria, limits, components, software, hardware, sub-systems, conditions and production processes. To be effective, all documentation exercise should comply with the principles of good documentation practices and its applicable requirements on change control, review, control of electronic copies, traceability and risk management, to name a few.

Apply lean design and development methods

The lean design method transcends project management and involves a more in-depth review of workflow and process execution. Originally a manufacturing concept, its principles work in any organisation seeking to opportunities to eliminate waste and slash operational costs. The lean methodology forces an organisation into the iterative review of customer needs and to fulfil these through the most efficient and adaptable means. It involves the re-thinking of what the value-add elements are in a process and applying only those that directly accomplish the final product goals. Lean design helps to achieve quality and profit at the source. This is accomplished by adopting continuous improvement, monitoring, validation, error proofing and standardisation at every step to assure cost containment, highest returns on investment and best product quality. When design requirements are matched to resource capabilities, this helps an organisation to better focus scarce resources on the most economical way to produce the best possible product design.