Business Online: Should costs decrease over time? Yes!

Another question I answer for clients — all the time — addresses the sense that costs should be going down, not up.

Apple Computer's website in 1987 was 'da bomb' ... remember that superbowl ad?
Apple Computer went online at Apple.com in 1987.  Email was the only thing going then, and “Bulletin Boards” … none the less, their machines was ‘da bomb’ … remember that Super Bowl ad?   This screenshot is their web presence in 1996 — four years into the web revolution.

The problem non-technical business people face is the legacy perception that a 2 or 3 year cycle of “colonization” for given technology “insulates” them from further expenses in the near term.  This preference for the “infrequent forklift upgrade” is convenient in the old paradigm for a couple of reasons.

First, the kind of expense taken to obtain a big step forward is easily underwritten as Cap-X.  (If the term capital expenditure is unfamiliar, shoot me an email.)  The differential benefits can be written down over time offsetting expenses in taxes.

Next, the operator is only required to “learn new stuff” intermittently.  This general “Techniphobia” is pervasive, even if we feel comfortable using the latest smartphone we resist learning how to use a Web control panel.

Relax, things are much easier to fix in this decade than they were in the last one.

But that legacy mindset ignores the opportunity that we Technophiles enjoy — We get to live online in elegant, current and compelling solutions for ever less cost.  Primarily because we understand where the opportunities lie.  But also that we have the skills to make the moves ourselves, and to optimize the opportunity.  (Sort of like I’m doing now.)

Businesses that operate online presences should explore relationships with consultants and vendors — until it’s possible to see the path forward where costs are forced down.   In this age, return on investment (ROI) should not be a calculation done on the back of an envelope.

Analytics help us to document all kinds of parameters.  If you’re not looking at site visit data and search terms, you’re missing opportunities.  Growth is one way to force costs over time (see the first option above.)   But so also is a steady trend toward efficiently adopting lower cost enabling services and knitting them together.

I remain a staunch ally of the thinking that embraces “taking our medicine regularly”.  Which normally means that instead of capitalizing a big project, we gradually absorb the effort in EBITDA. (Again, shoot me an email if you don’t understand that acronym.)  But there are other reasons that are equally compelling.

Online, the steady approach helps us remain relevant — so we’re less likely to loose existing clients because our online presence ages poorly.  A stale website is an enormous drag on your brand and destructive to your credibility.   Expenses taken in a gradual program toward improvement prove helpful in not only retaining clients, but getting those clients to help us with referrals.

There is the further economic benefit that if we’re adopting frequently and early we obtain the benefits of reducing costs.  For a small business, say with fewer that 10 email addresses — If your hosting fees amount to more that about $20/month.  You need to seek alternatives.  You might be able to operate substantially less than that.  Aim for $50/year.

I recently consulted a client acquiring a company who showed $52K capital investment in “Customer Service Infrastructure” that was in the 2nd year of a 10 year depreciation.  Digging deeper, it was evident that the investment went to a member of the family who’d developed the website on old technology.  The website already was so outdated it needed replacing.  This immediately became a sunk cost to the owners, and was removed from the business valuation.   Which means that those dollars evaporated as equity out of the shareholder’s pockets.

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