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SMALL BUSINESS | Entrepreneurship 101

Right Technology Can Give Small Firms Edge Over Large Competitors

November 04, 1998

Before jumping into technology purchases, you should focus on your business needs.

"You should assess your company's strengths and weaknesses and identify the areas that can benefit from technology, areas where technology can expand your business capacity, enhance efficiency and improve competitiveness," said Debra Esparza, owner of Esparza & Associates, a Long Beach-based small-business consulting company.

Technology alone won't save a disorganized, ill-focused or poorly thought-out business. It's a resource that must be budgeted, managed and planned for, just as time, money, materials and employees are managed. Technology is simply another tool that performs specific functions to meet your business needs.

For example, technology can speed up repetitive tasks such as creating and printing mailing labels, scheduling employees, processing payrolls, and preparing and mailing invoices. Off-the-shelf computer software for word processing, spreadsheets, accounting or sales-contact management can handle these tasks.

Information from these different programs can then be used to make management decisions and capitalize on opportunities, Esparza said.

For example, you can create a more effective sales effort by keeping customer names and purchasing habits in a computer database and using the computer to sort and target specific customers for a promotion or special offer. With a word processor, you can then write a personalized letter. And the contact management program can signal a date to send the letter and a date for sales staff to follow up.

Consider Using a Systems Consultant

With a computerized accounting system, you can more easily and quickly compare financial information from different periods. A spreadsheet program helps your planning efforts by enabling you to do "what if" scenarios, plugging in data to see how your business' bottom line would be affected by cost increases for supplies or labor, salaries for additional employees, or sales decreases or increases.

As your company grows, you may upgrade, buying more computers and more sophisticated programs. You might end up with separate computer systems for sales, purchasing, payroll and other functions. If you're involved in manufacturing, you may be using a robotics system to run machinery.

But if you don't plan properly, you can end up with a confusing mix of databases and systems, none of which can interact.

At this point, you might consider using a systems consultant to create a proprietary database that is specially designed for your company. But proprietary databases can be expensive and are useful only if you thoroughly understand your needs, Esparza cautions. Sometimes the same need can be met by off-the-shelf operating systems.

Incompatible computers and systems also are a problem for many large businesses. Their vast economies of scale prevent them from costly upgrading, so they retain what are called "legacy systems," outdated programs and machinery. Many small businesses do the same thing, continuing to run DOS-based computer systems on outdated 486 PCs, said Chuck Davis, a small-business market manager with Microsoft.

"Many small mom-and-pop businesses are struggling partly because they won't consider" more advanced computer systems or any computerized systems at all, Davis said.

Yet, these small businesses could use new computer systems to get a technological edge over bigger competitors, he said. One way is by creating networks or intranets: in-house computer communication systems that allow more effective communication. By linking sales and accounts receivable data, for example, you might discover that your sales staff focuses on a large customer who is always 100 or more days late in payment, harming your cash flow. Knowing this, you can get your staff to target faster-paying customers.

Once you've mastered your in-house computer operations, the next step is to venture onto the Internet. Market research on competitors, access to news, financing information, contracting opportunities and a variety of other information can be obtained quickly online, information that might take days to acquire with trips to the library and government offices, letters and phone calls. You can also communicate via e-mail with business partners and suppliers, plus send needed documents speedily.

But where small businesses can truly use technology to best effect is in creating a Web site. A Web site can be a virtual store, saving your business thousands of dollars in start-up or expansion costs.

For example, two young men in Southern California who realized they lacked the capital to open an aromatherapy store instead created a Web site that soon saw orders rolling in. A Westside flower shop set up a Web site to reach customers in the South Bay and found itself taking orders from Finland, Davis said.

"For a niche retailer, a Web site can also reach a larger area with less cost," Esparza added.

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