Technology in Business
David Dunn from the Vermont Small Business Development Center
Using technology to run a small business used to be a luxury, now it is an essential component of business management. By embracing computers, software, and systems, entrepreneurs can organize and quantify information to pro-actively justify business decisions.
Inexpensive software exists to help business owners make informed decisions about inventory, pricing, sales, profit margins, Accounts Receivable (A/R), Accounts Payable (A/P), and cash flow management. More advanced products can help with plan production, staffing, and analyze Cost of Goods Sold (COGS). Some sophisticated products will do all this and track trends in sales, customer relations, vendors, and even finance prompting you with recommendations as the software analyzes your business data.
Other technology products can help bring clients to your door. A web site, blog, and email marketing software can be powerful tools to attract prospects, generate orders, and track who buys your product. Developing social media technology can also be an important form of prospective and current customer contact. When used with other forms of marketing, these technology tools can make even the smallest business look big.
While the volume of products to choose from may appear overwhelming, and the technology itself might appear to be intimidating, searching for the right product(s) will help you refine your business model the same way your business plan helped you analyze your goals.
Computers and Networks
The cost of fast, networkable computers loaded with basic software is within the reach of every small business. Do you need to have the latest and fastest machine? No. Your machine needs to be fast but also cost effective. Consider buying less speed and paying a lot less money. On the other hand, if every program you use takes a minute to load and you use it every day; you will be wasting a few days per year staring at the screen, waiting.
A scanner, printer and removable back-up disk drive are additional essentials. The scanner will store documents that you want to save or send via email (like invoices) and it will replace a fax, which ties up your phone line. A color printer can produce nice looking invoices and while a laser printer has a higher upfront cost, the toner for these printers cost less in the long run than ink cartridges for an inkjet printer. A removable back-up drive takes your valuable data offsite in case of system failure or other emergency.
If you plan to have a front office and a separate production area, consider setting up a wireless network. As your business grows, the computers will link into a server. This system will eliminate a lot of sneakerware, i.e., running around delivering messages that could stop production and tie-up staff, as these are an inefficient use of time. Think ahead, anticipate what you will need in the future, and buy the hardware now.
Business Management Software
Entrepreneurs often ask whether they should purchase all in one or component software.
- All in one: These are products that contain modules such as sales order/invoicing, inventory control, purchase orders, bill of materials, A/R, A/P, and General Ledger (G/L). Sold by a single vendor, the modules link to one-another and share data between components,which in turn reduces data entry and errors. Invoices posted to sales, for example, also become part of A/R and the G/L.
- Components systems: These are are simply parts of the modules described above. You can purchase particular function(s) such as shipping, A/R, or A/P from individual vendors. In order to integrate your information, often you must manually transfer entries from one module to another, which may increasetime, labor, and risks of error in integrating information. Component buyers typically choose this route because only a particular piece of software exactly matches their needs.
Investigate an all in one program if you have a complex product that involves sourcing from multiple vendors, and/or a difficult production process. Also, consider an all in one program if you expect your sales to exceed $500K/year.
If your supply chain and production process is simple, and you have tight control over your expenses and production, component software can be the most cost effective strategy. If expense is a big concern but you are planning to become a large business, you should investigate purchasing components from an all in one company. If you are going to be web centric, for example, you may want to buy e-commerce and CRM (Customer Relationship Management) modules along with an inexpensive accounting program. As you build your profits, you can purchase more all in one components linking your data and increasing your processing and data management efficiency. While components are generally less expensive than an all in one system, again, it is important to think about how you will handle multiple systems once you start selling more product. Anticipate what you will need as you grow, not what you need now.
Most systems these days have databases that can be data-mined by third party software (such as Access or FileMaker Pro). These programs can glean specific information such as product sales within a zip code, or the actual delivery time to certain cities (important for perishables). This is information the main software cannot access, but will be important to you. Consider whether you want this function when you shop for your software.
While not an endorsement, the gold standard of small business accounting is Intuits, QuickBooks. Many accountants and bookkeepers use this inexpensive program. It allows your records to be easily exportable if you decide to use a bookkeeper. If you understand basic accounting, you can set this up yourself. This program resides on one computer and can be networked for multiple location data entry.
Another popular product is from NetSuite. This product is an all in one web based product so you must have access to a reliable internet source to use it. Data is viewed in real time, so inventory, for example, is constantly up to date as orders go out the door. Multiple computers can run the program simultaneously. NetSuite also incorporates CRM E-Commerce tools and EDI (Electronic Data Interchange) modules. By using the web and NetSuite's servers, you will not need to worry about backing up your data, because it will be backed up automatically. NetSuite bases pricing on the types of modules you purchase and the support they will be providing you.
A third program popular with many small businesses is Oak Street from Industrious Software Solutions. Similar to other all in one products, Oak Street is constructed of linked modules that provide you with a picture of all your business data in real time. Multiple computers can run this program simultaneously. Oak Street runs on a server at your facility and requires on site back up. Like NetSuite, Oak Street can handle E-Commerce and EDI transactions. Pricing is based on the modules you purchase and the support they will be providing you.
Customer service at both NetSuite and Oak Street will assist you with set-up, service, and on-going support. Both programs can be highly customized to meet your needs. They can analyze your orders,help you manage inventory and raw materials along with staff and production planning. These two programs can also interface with shippers to build in freight discounts based upon volume. Oak Stree, Netsuite and Quickbooks all can process credit cards, set credit limits and interface with your bank accounts. Check out each individual product website to see all the configuration options and maintenance contracts.
Many, many other business support programs are available for purchase or lease. Search the Web for: Small Business Software and see what you find. Check what your business friends and colleagues are using as they are usually excellent references.
Building a website
A website is a software program running on a server connected to the internet with a specific address that can be found when queried by internet users. Programmers program website software using one of a myriad of computer languages. A viewer looking at your site will see the content and functions you have chosen.
Websites are typically hosted by a service that loads your program/file onto their server. You pay a registry service to point your address to them. An internet user typing in that address will connect to the host's server leading to your website. The host is obligated to keep your site up and running. They will allow you (or your developer) access to your site for updates and maintenance.
If you use a website, you'll need to decide what your website will do, recognizing that the more it does, the more time you will spend managing it. Will it convey information only about you and your products? Or, rather will it be a way for prospective and current customers to communicate with you? Other things to consider are whether your site will be a portal to other functions, if it will include any extras, for example, a video of your product(s), a capability to place an order, or the capability for customers to send you email, or if you want to incorporate a blog onto the site? These functions all require important business decisions. While cost is one factor, your time and effort to manage it and keep the data fresh cannot be ignored.
Should you go it alone or hire a professional? If you had all the time in the world or you are technologically savvy, you could create your own website; after all it might be a lot of fun! Unfortunately, you may not have unlimited time. If time is a factor, consider focusing on the quality of your products and instead work with a developer to create the best web site to tell the story about your business and your products.
You or your developer (whether an individual or business) should prepare a written agreement confirming the work to be performed and your relationship/responsibilities during and after that work is completed. As part of this process you generally should:
Your agreement should specify:
- Consider your website to be a major project that will consume a significant amount of time.
- Have a clear idea of what you want on your website. What information or services do you want to provide; information only, ability to do commerce, have blogs, links to other sites and advertising? Do you want the website software to be able to analyze how many hits a page gets and how long a viewer stays on that page?
- Have an idea of how you want the content to look. Be prepared to make decisions regarding style, colors, and even fonts.
- Anticipate how big the site will be so the developer can quote a price accordingly. Get a fixed price if you can. You do not want a surprise in the final bill.
These are just some of the things to consider. If you do not have any legal experience, get a friend/lawyer with experience to help you. Just like when buying business software, get insight from business colleagues who have been through this process themselves.
- Who owns the program? The developer will usually prefer a particular software product they have experience with. Many different types of web software programs exist and you should have input into this as it will impact the cost.
- Who owns the design and content? Beware of programmers claiming copyrights to your materials simply because they placed it onto your website.
- How the site will be built and what will be your involvement in that process?
- Who will perform updates and maintenance?
- That you have the right to alter the site for updates or changes and that your developer agrees to show you how to do that.
Make sure to:
- Budget the cost to make sure you can afford it. Consider the costs of software, development costs, hosting, software maintenance costs, and on-going maintenance/customer service. A surprise can stop the entire project and may even jeopardize other aspects of your business.
- The host should have sophisticated offsite back up utilities to protect your program/file. Nevertheless, back up your website yourself and store a copy in a secure place. Some hosting sites have disappeared overnight leaving nothing behind.
- Be prepared to commit the time to keep your site fresh. Regular updates, new products, and saleswill help keep your customers interested.
Both Twitter and Facebook are new social media technology tools that offer unique visibility and marketing opportunities to even the smallest businesses. You should consider using these resources, especially if your products are aimed at the demographics of the people that use them.
Consider setting up a Facebook page, but be prepared to manage it closely. You can post pictures and information about you, your products, and your visionthat anyone can look up and find. You want to respond quickly to requests to become friends and to comments placed on your Wall as this demonstrates that you are attached and responsive to your audience.
Twitter can also be an effective tool to promote your products and attract customers. Like Facebook, you will want to pro-actively manage your Twitter postings. Use this tool carefully because it is easier for anonymous responders to make libelous statements about you, your products, or your company without consequence, as compared to Facebook, which requires users to have an identified profile.
Keep up to date on the latest tools and trends. While Facebook and Twitter are current as of the writing of this manual, social media is an ever-changing environment. There may be new or niche sites that are an even better fit for your company.
Alternatively, you should consider doing searches from time-to-time of key words related to your business so you can keep a finger of the pulse of your products and industry. You can set up a Google Alerts to let you know when your company name, or a specific key word, shows up on the Web.
Universal Product Codes (UPCs)
UPCs are an integral part of retailing. The UPC-A format, the most widely used domestic code, is made up of 12 digits that identify your business, your product, and include a check digital to verify the integrity of the code for scanners. The EAN-13 (European Article Numbering) standard is used in Europe.
Many retailers use UPCs to place orders, track sales, manage their inventory, and set prices. The scanner at the register is your best friend when it comes to re-orders, so you want the barcode created from your UPC to be clear and accurate. Consider having it printed on your packaging or use a good laser printer. Purchase your UPC company code from GS1.
Once you get your company code prefix, you must use it to create a unique number for each product you make. Many manufacturers embed this number in their software as a separate field next to their product name. You can purchase inexpensive programs or obtain shareware (free software) to create the check digit and print the actual barcode. You should expect to have barcodes with your UPC on every product package. Some retailers will demand that you add price stickers. Ask upfront if they want that and be sure to build the cost into your wholesale price.
Electronic Data Interchange (EDI)
Along with UPCs, EDI is a fact of life when dealing with large multi-store retailers. Everything from orders, shipping documents, and invoices gets handled electronically. As mentioned above, some business software includes provisions to handle the EDI process. Nevertheless, you will need to have a third party act as an intermediary (portal) to alert you to orders placed in the system. UPCs are used to transact business through this system. You download orders by logging into a network and in turn send shipping and invoice documents back to the retailer through this same portal.
Be very careful with the financial implications of conducting an EDI based business. EDI requires that you to produce special shipping labels (that require special software to produce). These must be placed on every shipping box, requiring close coordination between your front and back offices. Your work must be perfect because EDI retailers are known for generating charge-backs even for even simple errors that cost nothing to fix. You may wait months to get these types of issues settled.
Like most things, a small amount of planning can have a big impact on your success. Having well-chosen hardware, software, and systems is like a great recipe that works no matter how large the batch. While you may be small now, consider where you want to be in the future and then match your technology platform to your plan. Doing your homework will return exponential rewards. The buzzword is scalability, which is in essence, your ability to handle the increased demands of growth.
A properly set up and maintained system is like that quiet employee who always gives you the right answer and always gets the job done. An accurately arranged and maintained general ledger with documented conventions (e.g., client set-up, product identifications, UPCs) and procedures (who does what and when) can be the partner that helps drive your financial success. Anything less will consume lots of time and effort, and may even hasten your demise, despite your having the best products in the world.
In today's electronic world, a website is a necessity and social media is not far behind. A well thought out technological marketing and management plan can drive lots of interest. Avoid if only by finding the right resources and partners and laying out a clear plan that includes covering your risks. Then get going and execute it.