If you’re wondering how to allocate your limited tech budget, make sure you spend some time asking the right questions before you make any big decisions.
By Terri Coles
When getting a small business off the ground, it’s hard to know how to best spend your technology dollar. Do you restrict your purchases to a shoestring budget for now, or do you invest heavily early to ensure success?
Technology that’s capable of growing with your business is a solid investment. But over-investing at the outset can eat up the working capital you need to get off the ground.
“Technology for most startups and small businesses could easily be the most important factor in their success,” says Brian Moran [http://smallbusinessedge.com/category/brians-blog/], a consultant for small businesses and owner of Brian Moran & Associates in New York, New York. “It can be a tremendous advantage for businesses to look bigger while delivering outstanding customer service.”
Almost nine out of 10 small-business owners said technology is important to their business, according to a 2014 Ispos Public Affairs survey. But research from SCORE/Brother International Corp. found that two-thirds of small-business owners feel overwhelmed by tech.
Where to Start?
Start-up needs can vary widely by the circumstances of each business. “In general, I would start with focusing on the customers,” Moran said. How will customers interact with your business? For example, if customers will reach you mainly by your website, make sure it can be easily accessed and used on a variety of devices. Test your site on a computer, tablet, and smartphone and ensure that its design is optimized for each of those. Or, if your customers are likely to visit your website and then come into your retail store, consider technology that makes both of those experiences seamless.
Also think about your own needs and familiarity with technology, and what you’re able to put into learning it, said Roger Power, CEO of Versus Technologies in St. John’s, Newfoundland and Labrador and Startup Ambassador for StartupNL. For example, Power says, some technology is open-source which means that training is community based, while other products include training, case studies, and support with the package. Each has its benefits–but considering your own level of comfort with the technology is important when deciding how much to invest. If you don’t feel comfortable training yourself on a technology, or don’t have the time to devote to that, you may be better off spending more upfront to get a product that has more support built in.
You’ll also want to consider the technology–hardware and software–you’ve already got on hand. If you already have a desktop or laptop you plan to use for your business, look at products that are compatible with that hardware and operating system.
What to Skip?
Don’t invest valuable working capital in technology when a less-expensive or scalable option is available, Moran advised. “If there aren’t opportunities to buy a lighter version, or no leasing options, maybe you hold off on purchasing it until your business generates more revenue.”
For example, if you have a retail store you shouldn’t immediately invest in a state-of-the-art customer relationship management (CRM) system, the kind that might be used by a company with multiple locations. Look into lower-cost options that can be easily integrated into a larger system when that becomes necessary.
In his role with StartupNL, Power has seen the benefits of beginning with lower-cost and scalable business tools like Microsoft Bizspark, Google for Entrepreneurs, and Amazon Activate. “By putting these powerful tools in the hands of eager and innovative entrepreneurs, the local start-up scene is just exploding,” he said.
At the same time, there are times when it makes sense to invest in technology from the start, especially if your new business is very tech focused. “For larger firms, a percentage of sales is a useful metric, but we have ranged our R&D budget to between 20% and 50%, especially in the early days,” Power said. “We need the tools, and there is a minimum amount of dollars that needs to go into technology. We need to acquire tech, since it is an investment in enhancing the company’s capabilities.” As tech prices drop and more lower-cost but high-performance options become available, they can do more with less money, he said.
Talk to others in your field, Moran suggested, to see what they thought was and wasn’t worth the initial investment. “See what you need and what you can hold off on purchasing,” Moran said. “Don’t let your investment in technology get too far ahead of your sales.”
After you’ve done your research, talked to other entrepreneurs, and decided which technology you need right out of the gate, don’t forget to look ahead. Too many businesses owners forget that technology must be maintained, updated, and upgraded, Moran said, and therefore fail to consider what they might cost them on a regular basis or in a larger lump sum down the road. Technology that doesn’t work properly for you or your customers can cost you money in lost sales or wasted time.
“Think of your technology as the car for your business. Don’t skimp on oil changes, put the better gas into the car, and don’t forget regular tune-ups,” he said. “If you do the same for the technology in your business, it will run like clockwork.”
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