Technology is an ever-important piece of each and every business out there. The ones who are not current on technology are the ones that are falling behind in this world. The one thing we entrepreneurs have in common, whether your startup is self-funded or you have outside funding, is that we all have at least some money to spend on new technologies. The reason we spend money on new technology varies, however, the primary reasons are that it can give you a competitive advantage, provide a new revenue stream, make you more efficient, or help you reduce costs. So this begs the question, where do you spend it? And more importantly, why? Below, you will and some examples of necessary technologies as well as key questions that you need to ask when evaluating a new technology.
Due to the nature of our business, my partner and I are pretty big fans of technology. We talk about it in the same fashion as young girls who talk about pop culture. Thanks to the rampant nature of technology these days, you can constantly come across something new to try and implement or make part of your process. Some of these are free, and some of these can add up with month-over-month fees.
Below, I have provided some more context on why every company needs technology to a certain degree. Every company has different needs and requirements, and it is imperative to understand them. To help paint a more vibrant picture, here are few technologies that are critical to our business:
Email: You have to be able to communicate both internally and externally. (By the way, it is incredibly important to have your company email as email@example.com rather than firstname.lastname@example.org. The latter format makes you look sketchy and unprofessional to almost anyone who will come across your business).
Website: It needs to be aesthetically pleasing and always be running.
Booking Tool: This has to be simple to use for our customers, but also provide us the information that we need.
CRM Tool: We need to be able to keep track of our customers to provide them with the best experience.
Don?t misunderstand my objective here. I am not saying that every company needs the same technology we do. My point is purely that everyone relies on technology to a certain extent.
With all of this being said, at some point you are going to have to pay for something. Even the fanatical “couponers” at the grocery store still end up paying money. So you have to evaluate where you are going to spend your money. Here are a few questions that you should be asking yourself/your partner/whoever when thinking about spending more money. By answering these questions, it should become quite apparent to you whether or not it makes sense to spend the money.
Yeah, That?s Cool… But Do I Need It?
- Does this clearly solve a business need?
- What is the risk of not having this product in place?
- What is the Total Cost of Ownership (TCO) associated?
- Will there be an ROI to this new product? Or will it be nothing more than an expense? (Don?t forget that time is money when answering this question.)
- Who will benefit from this product?
- Is there a product that is cheaper? If so, is it as good as this one?
- Is there a product that is more expensive, but is much better than this one? If so, how much better is it and how much more does it cost?
In a former life, I worked with CIO’s on a daily basis and these were the questions that we were constantly reviewing. I was always amazed at how many C-Level executives didn’t know to ask these questions and/or couldn’t articulate the answers to these questions to a CFO or CEO. Understand this: While the magnitude of the decisions are different in an $800M company, the scale of the decision is generally pretty comparable when you evaluate your spend versus your revenues in your startup.
I cannot emphasize the importance of asking these questions. I am incredibly confident that these answers will help you be more wise and confident in the way you spend money in your startup, whether it is a one-time purchase of $50 or a recurring expense of $1,000 per month.
Ryan Duwe is the Co-Founder of Simple60, which trains users how to use their Apple Computers via the iChat application.Subscribe to the Podcast