Few things can be as rewarding as the experience of owning your own business, the feeling of being an entrepreneur, the freedom of managing your professional destiny.
With independence and self determination though come the profound responsibility of providing a good working environment and a reliable paycheck for yourself and your employees -- in good times and bad times. Each day you have to make hundreds of decisions that could change your life and the destiny of your company.
During tough times many small businesses fail because projected profits are overestimated, costs misjudged, and cash flow is out of control, while owners lose track of what works and what does not, taking chances not supported by accurate figures. A clear, analytical knowledge of your business performance is always very important to substantiate decisions, but it becomes absolutely critical in times of economic downturn, when the volume of business tends to be reduced, operational costs increase, competition steepens, and margins shrink.
The accuracy of decisions that could make or break your venture depends upon how refined is your understanding of variables such as operational costs, cash flow, yield of your marketing efforts, projected sales. Would you, for example, be able to quickly and reliably list your best customers, detail what your profit margins are, or assess the value of your inventory?
Analytics can help
To better weather a recession, entrepreneurs should consider adding to their instinct and experience the support of data and analytical evidence. In moments of economic crises only the most efficient businesses survive and thrive. Access to internal information can be the difference between success and failure, allowing you to accurately determine what customer to focus your attention on, what areas of your business to trim first, and how far down you could reduce your prices to remain competitive while keeping your profitability at acceptable levels.
Information technology has for decades enabled large corporations to acquire, gather, organize, represent, evaluate and prioritize information from all sides of their businesses. Today the same technologies are affordably available to smaller companies in what are called business management applications (BMAs). BMAs are software tools to help manage information across the entire business and assess performance in sharp, clear terms to reach more accurate decisions.
Most small businesses operate using an assortment of standalone, single-purpose software products to manage business functions: accounting, point of sale, inventory, customer relationship management, and most likely various disconnected online applications for tasks such as direct marketing, e-commerce, or group conferencing. Even when integrated, individual applications can rarely address the intelligence needs of a small business, mostly because the flow of data among the software programs remains limited, and cross-referencing figures becomes a very difficult task.
Tying together different business functions
Only software designed from the ground up with well integrated features and natively sharing information across functions can provide the information you need to truly limit the risk associated to your decisions. BMAs tie together most aspects of your business such as:
- Financials and accounting
- Customer relationship management
- Purchasing and merchandising
- Production and manufacturing
- Inventory management and distribution
- Order processing and shipping or delivering
- Human resources
Ideally this type of intelligence should be available on demand, easy to access in an understandable and usable format. A new generation of BMAs is attempting to make this happen by fully leveraging the power of the Internet and Web 2.0 technologies to deliver corporate-grade functionality to small businesses with low deployment overhead, universal accessibility and pricing models with minimal initial costs.
In general there are great advantages for small businesses with limited technical resources in using Web-based BMAs, versus installing and maintaining complex software on their local network. These benefits in most cases include:
- Very high level of collaboration among employees: your entire team can access your company's information and work from anywhere they have access to an Internet connection;
- No software installation or management, no servers required;
- High level of data security and availability with frequent and reliable backup;
- Very high level of integration with ecommerce and online payment processing services.
The leaders in the online BMA market, each focusing on slightly different market segments are NetBooks, Salesforce.com, SAP Business One, and Netsuite. All these products offer different plans meeting the diverse needs of small businesses, providing tailored software applications as a service, with quality customer support and very simple setup.
Ultimately, following only a modest investment, the adoption and use of online BMAs will help your business adapt to the economic downturn, by helping you:
- Simplify your financial management, improve fiscal insight and manage risk;
- Decrease the lead-to-sale time, increase the reach of your marketing and open new channels;
- Identify inefficiencies, reduce operational costs, increase flexibility and responsiveness;
- Increase productivity through better communications and better access to information.
Economic downturns are part of the American economic system. They are important moments to weed the strong businesses from the weak ones, and prepare for the next period of growth. This is the time to think ahead, adapt, and create new opportunities.
Andrea Peiro is a recognized authority, author, analyst and speaker on high-tech marketing and use of information technology in small and mid-sized businesses. He has been frequently interviewed and featured in such media outlets as The New York Times, The Wall Street Journal, and Inc. You can reach him at firstname.lastname@example.org.