small business technology :: costly mistakes you don’t have to make

 

Main Street Ventures is new to WordPress, so we're manually posting some recent musings to add to our library until we have an opportunity to import our existing blog onto this platform. Thanks for reading!

May 1, 2009
jack speranza

Of all the organizations contributing to our economy, small businesses have the least amount of leeway to recover from mistakes. With technology playing an ever important role in all businesses, "screwing up" on your IT decisions is less about picking the wrong technology and more about paying way too much for what you ultimately choose. For small business teams that lack technology savvy, the explosion in "cloud computing" (other terms include "Software as a Service" or "Hosted Applications") provides plenty of good options for avoiding costly mistakes.

The first major benefit to utilizing hosted software services for some of your core business needs concerns every small business owner's best friend -- cash. There are no large cash outlays for subscribing to hosted services like there are with purchasing "off the shelf" software. Similarly, you can buy fewer and less expensive computers without having to host your critical applications locally (since you do everything over the internet, usually on your browser). When and if the time comes where it makes sense to take things "in-house," most will provide mechanisms for migrating your data into new applications (though the extent to which "useful" data can be transferred to a new platform will vary). Here's just a small sampling of some of the critical software applications most small businesses use that can be "leased" instead of "bought:"

  • accounting software
  • sales / CRM (Customer Relationship Management) tools
  • e-mail and web sites
  • data backups

Starting with a hosted application essentially lets small businesses make inexpensive mistakes. If you were to buy an accounting or CRM program to manage your sales and customer service and found it didn't work for your operations, you're out the entire purchase price. Do the same with a hosted service, and you're only out the monthly cost. The more cash you preserve, the better your chances of growing your business.

Unfortunately, most IT consultants make their money selling products for which they can then charge fees to install and maintain for your business. On the flip side, most technology professionals gravitate to recommending and working with what they are most familiar. So, unless you have the time and knowledge to evaluate your options in the context of your overall business needs and plans, navigating the best path through your technology options can be daunting.

SHAMELESS PLUG :: this is one of the many arenas where Main Street Ventures delivers real value to our business partners. Feel free to nudge us for some free advice, and if you need more than that, we can chat about how to best solve your needs without breaking the bank.

small business is the economy

Main Street Ventures is new to WordPress, so we're manually posting some recent musings to add to our library until we have an opportunity to import our existing blog onto this platform.  Thanks for reading!

April 30, 2009
jack speranza

Being based in Massachusetts, we tend to pay attention to developments, facts and trends that reflect our local environment.  Though it's somewhat old news at this point, the SBA released an updated Small Business profile for Massachusetts earlier this year that contains information most will find surprising.  For a state that boasts a big number of large companies (think EMC, Fidelity, Gillette, Raytheon, and Bose to name just a few), it's small businesses (counted at almost 142,000 strong) that employ 98% of our entire workforce.  98% -- that number is truly staggering.

Now here's some even more impressive statistics:

  • small businesses created 34.7% of the state's net new jobs from 2004 to 2005 (the latest available data).
  • microbusinesses (self-employed persons and businesses with five or fewer employees) make up over 80% of all business in the state and employ almost one-fifth of our total workforce (both private & public sector).
  • we're pretty much a reflection of the national economy :: the U.S. has slightly more than 6 million small employers (99.7% of all employers) who collectively provide 50.4% of all private sector employment.  These companies created 78.9% of the nation's net new jobs from 2004 to 2005, and generated more than half of our private gross domestic product (non-farm).

 Now, the not so good news :: creating a sustainable small business is a tough row to hoe.

  • while 66% of new businesses survive past 2 years, only 44% make it past 4 years, and only 31% past 7 years. Various studies reflect:
    • 80% of these businesses failed because of poor management, poor marketing, or lack of capital.
    • critical economies of scale are never achieved. For example, firms with less than 20 employees spend 45 percent more per employee to comply with governmental regulations.

Sources:  U.S. Small Business Administration Office of Advocacy, September 2008
                        University of Maine School of Economics (microbusiness statistics compiled by Prof. J. McConnon, Jr.)
                        American Express

the realities of main street 

Angel investors, venture capitalists, and similar sources of private capital only invest in companies with high revenue potential. If a significant return isn’t possible at the end of the day, there is simply no incentive for the investment to be made. Because of the risk / reward potential, most portfolio companies are supported by significant services to enhance their chances of success.

Similarly, communities will often devote substantial resources and effort to attracting large companies. While landing the “big fish” creates a splash that grabs headlines, the total economic impact to the community is probably far less than if the same resources were diverted to supporting the creation and sustainable
operations of 20 microbusinesses.

Most of the businesses we see along main street don’t fit the “investment” profile of these organizations.  With most destined to build a business that will be lucky to generate revenues of $1-2 million annually, this backbone of our local and national economies are essentially left to fend for themselves.

Being a resourceful bunch, most new entrepreneurs and small business owners make good use of the resources that are available:

  • 52% seek advice from individual mentors;
  • 51% solicit help through social networks;
  • 44% from trade associations;
  • 36% from business advisors;
  • 31% from the Internet; and
  • 27% from Chambers of Commerce.

Source: American Express

Unfortunately, while these resources bring the ability to create solid business strategies within the reach of main street businesses, there are scant resources available to help the entrepreneur or business owner with actually executing against those strategies. Thus 80% of all businesses failures get tracked back to poor management, poor marketing, or lack of capital.

For the past several weeks we've been working with local businesses, organizations and a few academic institutions to create a truly innovative program that just might bring some much needed help to "main street."   Right now, we're looking for input from small business owners -- what help do you think you need most?  Let us know.

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