Principles of Lean Spending

Principles of Lean Spending: Doing the Most with the Least, Pt. 1

By Diane M. Calabrese

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Editor’s Note: Part II on the topic of lean spending will appear in the May issue of Cleaner Times.

 

Lean Spending

Fat-free meat is more pliant, less stiff. It is lean. In the development of English, the word lean, which means to bend, became a modifier that indicates no waste. As such, the business world incorporates lean-spending principles as a way of doing the most with the least.

Lean spending principles interest both new and established business owners. This month we look at how contractors can apply lean spending principles when starting a business in the pressure washing industry. Next month, we consider how lean spending principles can bolster established businesses.

Tina Kitts, the CEO/president of T.A.S.K. Clean Team in Euless, TX, had experience using lean principles before she and her husband decided to launch their company. “I was an independent contractor,” she explains.

Plane tickets, hotel rooms, and other ancillaries were things for which Kitts had to budget in any proposal. She evaluated carefully. She still does. Kitts’ goal then and now is simple. “Just try always not to have any debt,” she explains.

Using her own capital to start her company, Kitts strove to keep costs at a minimum by making exacting choices. For example, in purchasing equipment, she did not buy on price alone. “I bought the best equipment I could buy—at a good price,” she says. “My first pressure washer unit purchased in 2006 is still running,” says Kitts. Good maintenance and a good machine account for the longevity, she explains.

Since launching her company in Utah, Kitts has moved it to the Dallas-Fort Worth area, following opportunities in that metropolitan area. Lean spending continues to be a “daily” part of business, she says. “I try to teach my employees the same thing,” says Kitts. She wants them to scrutinize how money is being spent. “I think some businesses overextend themselves,” says Kitts. In contrast, her business plan encompasses spending in a thoughtful and prudent manner.

Lean spending actually has a companion in the lay world. There are countless advisors on trimming the family budget who recommend never going to the grocery store without a shopping list and then, buying only what’s on that list, after doing some comparison of prices and quality in the store. Adhering to the list is the surest way to avoid buying what’s not needed, and it holds down total spending.

Bootstrapping?

Prior to the embrace of lean spending principles, business theorists used the term bootstrapping more often. Lean spending contains many of the elements of bootstrapping, especially the element of not borrowing.

In the case of bootstrapping, though, an owner may not have access to a line of credit. There’s no option to borrow. Lean spenders typically have the option, but they choose not to use it. On the other hand, lean spenders are bootstrapping. They are growing their businesses in a way that minimizes expenditures and maximizes returns on the small investments.

“When we started our business, we were fortunate not to have to use any outside investments,” says Ross Kollar, vice president, TEMA Cleaning in Girard, OH. “All of our equipment was purchased with internal funds.” Lean principles really can be used to start a business. “I would highly recommend lean spending principles to other business owners, especially those who are in the early stage of a start up,” says Kollar.

An advocate for lean spending principles, Kollar shares some of the essentials. “The best practices I recommend are self-performing as much work as you can, avoiding a large inventory of cleaning products, and designating a portion of your revenue to be reinvested back into your business for equipment upgrades, hiring helpers, etc.”

At Kollar’s company lean spending principles are as important today as they were at the launch of the company. “Lean spending is utilized on the purchase of cleaning material and by staying on top of the maintenance of our equipment,” he explains. “Equipment maintenance is self-performed by our in-house staff.”

Possibilities

Starting a business in the pressure washer industry without a loan is possible. Countless owners have done the same by applying lean spending principles to everything from securing a space for their business to getting the word out regarding their services.

Space—Depending on zoning laws, it may be possible to use a residential garage or a shed that the entrepreneur already owns as space for the new business. Not just contractors get going this way. Many distributors have done the same.

Equipment—Buy the best machines possible. The longer equipment can be kept in service and the better it performs, the less the cost per hour of operation.

For some purchases, consider buying used or surplus equipment. Get on the surplus sales list for your state to get notified when auctions will occur. If buying surplus, it’s probably best to stay with entities such as tables and storage cabinets—anything without mechanical parts. Machinery in the surplus category poses many risks to the buyer who is a novice in maintenance. For machines, working with a dealer that services and sales used equipment is a better idea.

As part of buying, be ready to learn and to form professional bonds. An equipment distributor would like to build a lasting relationship with a contractor. A contractor should talk with a distributor to learn as much as possible about equipment. Describe the sorts of projects slated and seek advice about the best choice(s) in machines. Then, depend on the distributor for service. (All the same applies to a new distributor only in reverse.)

Hiring—Take the time to hire employees who are likely to stay. Turnover is costly. So is having an employee without sufficient work to do. If it is possible to get the business started as a one-person company, consider hiring a spouse or adult child to help with bookkeeping because tapping a family member will reduce the regulations that apply.

Advertising—Exploit every low-cost method. Put the name of the company and phone number or website on t-shirts, hats, and the side of the truck. Set up a website, even if it’s only one page with a list of services, phone number, and location. Search engines will get to the site, even without making payments to the site forward, and people searching for companies in a particular location will see it.

Selling—Use every interaction with a prospective customer to sell services. If writing a proposal to clean pavement in a driveway, give the customer a price for the driveway and walkway, should the customer choose to add the walkway.

On the distributor side, do the same. Use every interaction with a contractor to mention a new or improved product or to remind that equipment is due for service.

Don’t Go Lean On Knowledge

Spend wisely, but be savvy about the nature of the business being launched. Kitts, for example, had never worked in the pressure washer industry before she and her husband officially started their company in 2009. Yet the couple had good, informal knowledge of the industry. “We had some friends in San Diego in the industry,” says Kitts. “Both of us were in the special events’ world.”

A clean venue is at the core of any successful special event. Moving to the cleaning side from the organizational side of special events was a change. But a great deal of useful knowledge—contacts, workaround requirements, timelines, etc.—were already in place that transferred to the cleaning side.

The willingness to learn, the ability to make adjustments, and a sincere desire to make a business successful are the constant partners of lean spending. Finally, a new business owner must be realistic about why the business exists. The goal is to make money.

In the early days of a business, an owner may try to spend little by not taking a salary and investing profit in the business. For a short time, that can be a viable strategy. It can, however, induce a contractor to charge too little to increase sales and thereby, essentially work for free (after all cost centers are covered). Balance is a must. Be lean, but also be keen to see and sustain a profit.