Venture Online

Insights Magazine
May/June 2007
By Carolyn Tang

Follow these six steps to launch your SMB into cyberspace.

As the online and offline marketplaces merge into a single, seamless experience, more and more small- and medium-sized businesses (SMBs) are exploring ways to incorporate technology into their daily operations. Given that today's commerce environment is unlimited, technology is a key enabler in discovering cost and time efficiencies, as well as greater consumer reach.

However, technology is a double-edged sword. While it enables existing brick-and-mortar retailers to reach beyond their physical market presence, it also lowers the barriers to new market entrants by eliminating the overhead costs associated with a physical storefront. SMBs are now experiencing what Borders and Barnes and Noble faced when Amazon entered the bookselling arena.

"In the 1980s you might have had to invest millions to build effective systems for your business. Everything would have been coded from scratch because off-the-shelf solutions didn't exist. Today, the same system that would have cost millions 20 years ago, is now available as a shrink-wrapped software package for around $200," explains Ken Gaebler, president of Gaebler Ventures, a small-business incubator based in Chicago.

Barry Goldware is the president and CEO of Retail Concepts, Inc., the parent company of Sun and Ski Sports, Ski Chalet and Ski Stop, three East Coast specialty retailers. Increased competition was certainly a motivating factor in Goldware's decision to debut his specialty brick-and-mortar retailers online last year. In 2006, Goldware launched SkiChalet.com and SunAndSki.com, with the goal of becoming a "click-and-mortar," multi-channel retailer.

"We knew we were losing some customers to e-commerce, and in order to preserve our business, we also wanted to have a presence online," he explains.

However, while the decision to enter the virtual marketplace was a simple one, Goldware cautions that the actual process of going online requires significant preparation. "It is a completely separate business model that requires time, attention and investment," he explains. "You can't just put some products online and start selling."

A marketing study conducted by AcceleWeb, Inc., a Chicago-based developer of e-commerce websites, discovered that time and money were the two main obstacles preventing small- and medium-sized businesses from entering the online arena. "Most SMBs are too busy running their business to have time to find a website partner, negotiate project terms, and then create their online presence. There's also a lot of overhead involved in continued site maintenance, which for the most part still requires core technical knowledge that the business owner may not have in-house," explains AcceleWeb President Manish Shah.

Goldware agrees. "You have to make a commitment to take your business online. And once you've done that, you have to research what the process is at a higher level. We knew we weren't online experts, so we developed a business plan with consultants and hired a whole department to launch our e-commerce function."

Given that most SMBs will not have access to internal e-commerce expertise, it's likely that these business owners will be looking externally for guidance. "If technology is not your strength, you need to find a trustworthy advisor who will give you good counsel. Do not take advice from somebody who is trying to sell you something. They rarely have your best interests at heart," cautions Gaebler.

He suggests these six steps to find the right solution.

Step one: Analyze objectives

Put together a technology plan, or a written document defining the coming year's investments in technology, the rationale behind the investment, and key items that must be in place to ensure the objectives of each investment are achieved.

"The old adage, 'If you fail to plan, you plan to fail,' applies particularly well to technology investment. Businesses that approach technology planning in a systemized, structured fashion will always outperform peer businesses that don't have a technology plan," says Gaebler.

A technology plan is only as good as the business plan it is designed to support, so Gaebler encourages SMB owners to list any perceived business weaknesses. "Defining a goal-oriented technology plan for your business starts with a frank assessment of what needs to improve," he explains. Possible weaknesses include:

- We don't have a good handle on profitability.
- Competitors have a stronger Web presence than we do.
- We have no idea what our return on marketing is.
- We need help getting more leads in the door.
- Projecting future sales from our pipeline is difficult.

Step two: Translate weakness into strength

Now, blink and take another look at that list. It's not a list of weaknesses, but rather a list of opportunities for growth that can be achieved through technology's proper implementation.

"In addition to defining technology initiatives to transform those weaknesses into strengths, it's a good idea to review a list of possible technology investment areas and assess whether there are any technology initiatives that you should be pursuing that haven't yet made your list. A comprehensive list might include items like data back-up and recovery solutions, or search engine optimization initiatives," says Gaebler.

Step three: Quantify bang for your buck

Now that you have a list of business weaknesses and technological solutions, your next step is to quantify "the business bang for your technology buck."

SMBs should consider not only potential cost savings, but also the opportunity cost of not making the investment. By doing this, SMBs are better able to prioritize technical projects.

"Try to quantify your return on investment. If you purchase Customer Relationship Management, for example, what effect will it have on your business? How quickly will you earn back the investment you make? Additionally, if you don't make that investment, what impact will it have on your business?" Gaebler asks.

Step four: Take a holistic approach

"For any given project, consider what you might need in the way of training, people, external consultants, software, hardware, infrastructure and changes to business processes. The worst thing you can do is invest money in technology, and then not achieve the benefits because you didn't think through exactly what would be needed to get the benefits," Gaebler warns.

Taking a holistic approach also means fully understanding how technology will impact your current employees and their functions. Before Goldware launched SunAndSki.com and SkiChalet.com, for example, he revisited each retail business function in his operation, from customer service to fulfillment. "We had to involve our buyers. We had to involve our IT department. We had to set up separate processes in our distribution center for the fulfillment of orders," he explains.

Step five: Consult with others

Once it's all down on paper, Gaebler advises reviewing your technology plan with others in order to gather valuable feedback on your priorities and expectations, as well as advice on the best technologies in which to invest.

"Other businesses often can provide valuable advice. One small business we consult with recently swapped out a $40-per-person-per-month professional services automation solution for an equivalent solution that was $20 per month regardless of the number of seats. They made that move after talking to another business owner," Gaebler relates.

This review process isn't limited to third parties. Gaebler encourages presenting your technology plan to internal stakeholders as well. "Don't forget to get your own employees involved in your technology planning efforts," he says. "After all, they are the ones who will have to live with the decisions that are made. Make sure you have their buy-in. And, since they are so close to the business challenges, they will likely have excellent input."

Step six: Revisit the plan

Once the plan is complete, the next step is its implementation. "Don't simply file your plan in a filing cabinet and forget about it. You need to frequently review it and discuss your progress in implementing it. More importantly, you may need to make changes to the plan. Your business is dynamic, so your technology plan needs to be as well. I recommend spending a half-day reviewing your technology plan at least once every quarter," Gaebler advises.

Developing a technology plan could take several months, and if building a website surfaces as a key initiative, Shah says it could take another three to six months to create one from scratch.

"Once the decision to go online is made, develop consumer experience diagrams using tools like Visio, or even just a pen and paper," he recommends. "Then gather together visuals and content. Consider documents, photos, video and any associated trademarks or copyrights. Finally, it's cost-effective to hire a single vendor that can bulk all tasks associated in creating the website."

Goldware emphasizes that going online does require significant investment. "You have time, effort, new systems, and that first year or so may not be profitable. So make sure you have the financing in place to make that investment and be able to run it for awhile before you break into that profitability," he explains.

"Like I said, it's a separate business," he adds. "Anybody who thinks you can just turn a switch and you're on...it doesn't happen that way. And we're learning everyday."

Don't be Obsolete

Anticipating costs associated with obsolete technology is an important factor to be considered when selecting a vendor. "Some vendors will automatically upgrade you to new technology and swap out older technology, or will give you a discounted price on the new technology. It's good to negotiate that future upgrade long before the new technology exists," Gaebler advises.

Additionally, he recommends going through a thorough due diligence on a technology investment before writing your check. "Vendors benefit from making it difficult for you to switch to a new solution. You want to make it as easy as possible to switch whenever you need to," he says. "Hopefully, you won't have to switch. But with technology, it's wise to hope for the best and plan for the worst."

© 2007 by Insight Magazine