What exactly is a lean startup?

A lean startup is a company that is started without any outside funding help. It could be considered the exact opposite of the venture capital startup, which relies completely on people with deep pockets to finance whatever the business is going to be about.

A lean startup is usually very localized in nature. This is a company that starts within its local community and expands out as far as it can without any financing from the outside. Lean startup companies usually do not take any bank loans.

The number one criteria to be a lean startup is funding the company based on revenues that customers generate. Basically, a lean startup does not have money until it makes a sale. It cannot truly start until it has customers. This is why many lean startups begin as hobbies on the weekend or vocations that eventually turn into a business. The person who is starting it cannot receive any help from the outside for anything including hardware, marketing or even the administration of the service.

Because traditional banks are closing their doors to many small businesses, more people than ever are becoming lean startup business owners. They are finding ways to finance their operations based completely on the customers that they serve. They do this through cash-based accounting that does not allow people to take a service now and pay later. They also factor in their time and energy alongside the service that they actually performed. Lean startup owners put a value on their manpower, and this is usually what creates the profit margin that allows them to succeed.