Without a doubt, the answer to the above question is THE BUSINESS!  But it’s amazing how often we forget this when looking at new technology to implement in a business.  Far too often, a cool new technology noticed by a business owner or the desire of their IT company to play with a new technology drives the decision for an implementation.  While there may be merits of the technology, the decision to affect a business’s production environment should be driven by a business need.  For example, we have clients come to us all the time saying something like, “Shouldn’t we be upgrading to Windows 7?”.  Our reply is usually, “Why?  Do you feel that one of the new features can help with a business problem you are having?”  While the answer is sometimes yes, most often it is because they have a friend who got it or saw a good ad on TV.

As a technology partner for our clients, we use the mantra that business needs should always drive technology implementations, not vice versa.  To help our clients make the best use of their technology investments we will work to understand their business so we can help them make informed decisions.  Some of the things we want to determine are:

• Is there a business problem you are having that is driving this?
• Have you considered all of the costs of this implementation?
• How will this affect your interactions with your clients?

By working in this fashion, we believe it build good long term relationships as we are not simply looking to book every billable project we can get our hands on.  In the long run it is a win/win.

We have compiled a more thorough list of the things we evaluate when helping a client determine if a new technology is right for them.  Download our “10 Reality Check Items to Consider in any Technology Implementation“.

A quick reminder for business owners that we’re nearing the deadline to purchase and install new hardware and software and qualify for the Section 179 deduction.

Please contact us ASAP at 1-866-GO-SITE if you need assistance with a quote for replacement equipment or assistance with installation.

Great question.  Maybe you shouldn’t?  We talk to clients about this all of the time and have counseled many businesses into and out of replacing network equipment currently in place.  Often the issue if forced when there is an outage of an aging server but in our network support model we try to be more proactive about the process and help a business owner understand the potential business benefits to replacing a server, leaving it as is, or even extending the warranty for another year.

The first thing you should do in considering a server replacement is calculate the ROI for the project.  Unfortunately, there is no magic number for the payback of a new server as all businesses are different but we have compiled 10  Things to Consider when making this ROI calculation.   The list includes hard calculations like the average hourly wage of your employees and the amount of time spent on repetitive processes but it also considers less concrete items like peace of mind of the business owner as that is also definitely worth something in today’s stressful business world.

Some quick guidelines as to whether or not to replace would be:

Replace if:

• There a positive ROI (as discussed above) for the project
• The server is out of warranty (if it is, it will more likely have a hardware failure) and it can not be extended
• The server does not meet your basic business functions and is holding you back

Extend the Warranty if:

• The warranty can be extended and the server is meeting your basic business needs
• You do not expect your business needs for the server to expand greatly in the next 12 months
• You would like to replace the server and it is borderline, but you need to plan for the expenditure in the next budget cycle

Generally, a server will be an effective business resource for 3-5 years depending upon business growth.  After 5 years, server hardware can become unreliable, sluggish and apt to fail.  If you are in the gray area somewhere, you may want to consider calculating the ROI of replacement to see if there is a real payback for your business.

Download 10 Things to Consider when Calculating the ROI of a Network Server Replacement

As many people in the business community are trying very hard to make the most out of a year when all the cards seemed to be stacked against us, it is easy to put off the task of figuring out what we will spend next year to move our businesses forward again.  While budgeting for technology can seem daunting at times, it is the best way to make sure that you take into account all of the things that will help your business run most efficiently with minimal downtime.

We must first consider the standard operational items such as preventative maintenance and support - which every business should have in place.  There are also a myriad of other items that often get overlooked during the budgeting process that can pop up during the year causing undue stress on the budget and the management.  Some things to consider include  software renewals,  such as anti-virus or backup software.  You should also review your current hardware to determine what is out of warranty.  Based upon the function of the device, a warranty renewal or hardware replacement may be in order.

For those of you who have already considered the items above, congratulations!  You are ahead of most businesses at this point.  There are a few more strategic items you might consider,  a new business resumption plan or updates and testing to the one you have to ensure its viability.  Also, in today’s world of hackers and viruses, many businesses are being proactive about auditing their network and web site security to protect their valuable business data.

While this all may seem overwhelming, it doesn’t have to be.  You can use a budgeting template much like the one we use for our clients or simply hire a technology company to review and plan all of this for you.  We have seen many cases where our involvement early in the process has helped our clients plan better and avoid unexpected expenses during the year.

Download the Technology Budget Planning Worksheet

Being in a service business providing computer support and web development, our product is our people’s time.  As our technical staff work on many projects and clients within a week, time planning for their weekly schedule is critical to ensure the best possible use of their time as well as the proper availability for emergencies that crop up.  To manage that in our world, we have implemented a categorization process for the types of work we perform and track what percentage of our time goes into each type.

To begin, we examined the work we did over a 12 month period and determined that the work was either recurring scheduled, planned projects, or “pop-up” work that occurs during the week that we didn’t know about ahead of time but had to handle.   I’ll refer to those types as Scheduled, Project, and Pop-up for the rest of this article.

As expected, the scheduled work we had a pretty good handle on and could calculate how much of our week would be dedicated to that.  The piece we had the least control of was the Pop-up work as these types of requests would come from our clients as they had issues or needs that couldn’t wait until their next scheduled visit.  While that was unexpected work, we found that on a week to week basis, the percentage of our time that this took was fairly regular.  So now we had two of the three variables somewhat accurately calculated.  But what about the project work?

In a client oriented network support and web development business, it is unrealistic to expect that your technical people will be 100% billable unless that are working on long term projects or placed full time at a client.  We use 80% as a target for our people which helps to account for vacations, personal time, internal meetings and training.  With that target, we need to figure out how much Project work we need to fill the gaps between the predictable Scheduled work and the peaks and valleys of the Pop-up work to hit our billable goals.

In planning the workload properly throughout the week, we have increased productivity of the individual engineer’s and developer’s as well as managed the workload to avoid missing SLAs or burning out our staff.
Additionally, proper management of the different work types has led to higher billable ratios and happier workers.  All around, it has been a win-win.

As I am finishing out my Executive MBA program at the University of Connecticut School of Business, I have started thinking of themes for 2009 that I will employ to fill up all of my newly found “free time”.  One theme is “learn how to be a father to my first born daughter”, now 4 months old, but writing about that would be much more than a simple blog post and so far, I am no expert. A theme that applies better to ForeSite is “Turning Data into Information”.  We have spent many hours and thousands of dollars creating and updating systems that track all sorts of data.  The problem is that we, like most companies, never turn it into useful information for our business.

I will have several posts about the successes of this undertaking throughout the year, but some examples of places I am looking to achieve results are:

1. Looking more closely at the profitability of certain product lines, and even certain clients
2. Figuring out the best areas to focus internal training efforts based upon the success of past projects
3. Evaluating the health of our client base using certain metrics and measures that can be regularly calculated
4. Looking at how our workload flows between recurring scheduled work, project work and work that crops up day to day so we can better schedule and plan our technical staff on both the web development and network support teams

We have painstakingly gathered the data to properly derive this information, but the act of actually mining it is what’s next on tap.  By integrating what we have built into our PHP web based production system called HaTS and pulling data from other systems such as Quickbooks and ADP payroll I will have much better tools for managing the growth of ForeSite.  You can most likely do the same with varying levels of effort based upon what data you have collected over the years in your business.  If you start looking, you’ll probably be amazed at how much information you have hiding in data that you are not putting to good use.  Stay tuned for what we find!

For 12 years in business I managed to avoid using an outsourced payroll service.  I simply used QuickBooks for processing my payroll and while it was a little more costly per person than a large payroll house like ADP or Paychex, it was simple and all in one place.

As ForeSite has grown I decided I needed more help with my HR functions.  I tried a small HR company but had nothing but issues with availability and consistency.  I heard about ADP TotalSource which sounded like a dream come true.  I could get a full scale HR department for a fraction of the actual cost, and get the advantage of scale when using their benefits.  The only hitch was that I HAD to use their payroll services for this to work.  I only had two requirements for this project: 1) The payroll transition had to be seamless for  my employees, and 2) All of the information from a payroll run needed to be bought back into QuickBooks so I can run reports as I do today.  ADP promised me that this was not a problem so I went ahead and signed up.

Unfortunately, they stretched the truth about getting data back into QuickBooks and I found myself out of luck after dealing with several levels of support at ADP.  So as a software development shop, what did we do?  We built it ourselves.  I had our development team create an application that can take the simple tab delimited download report from ADP and create all of the proper journal entries so my accounting records are accurate.  It works great and has solved my problem, but buyer beware if you are signing up for one of these payroll services.  Getting data back into your accounting system is not as easy as they say it might be without having someone do additional work or having a program like the one we have built at ForeSite.

In a time when it seems the government is giving cash to every large mis-managed business in the country, it is frustrating as a small business CEO trying to get more breathing room on our credit line and are told no because the credit markets are in disarray. We didn’t create this problem, but its not going away so we WILL have to figure out how to deal with it. There are a few things that we have instituted at ForeSite which have helped dramatically which might help you too.

Determine your receivables formula
The first thing you have to do is figure out how you can forecast cash receipts for the future. It is easy enough in a program like QuickBooks to run an average days to collection report, but there is more to it than that. You must then take that number and track it back to your sales to figure out on a weekly basis what you can expect to come through the door. The model we use in a rolling 13 week cash flow spreadsheet is the following:

- If sales 4 weeks ago = 0
- Return average last 6 weeks cash receipts
- Else If Cash Receipts Known < Avg Sales 4-5 weeks ago
- Return Avg sales from last 4-5 weeks (average collections have been 31-33 days)
- Else
- Return cash receipts known

This model has proven to be fairly accurate over time for ForeSite understanding that is is only a model.
Once you have projected your cash flow, you can do some things to try to improve it:
1) Take credit cards - It is worth the 3% transaction fee to have your cash now. That is a lower rate than you will pay to borrow it.
2) Do credit checks on your clients - if their score is below 700, you should probably reconsider whether or not you want to give them terms.
3) Use a collections company - Sometimes the simple threat of being sent to collections will get you money you had mentally written off long ago. Try a company like Trans World Systems who offers to send letters first to try to collect before they take a percentage.

While this is certainly not an exhaustive list of preventative tasks, they have helped us manage our cash flow issues and make our credit line last an additional year during a time of business growth for our company.

As an SMB, we don’t generally have the time to run a myriad of reports and twist and turn data to figure out where we are making money and where we are not.  Sure, direct expenses are east to calculate, but which lines of business are taking up the rest of the company resources such as sales, marketing, accounting, administrative support etc.? One way to get to the bottom of it without spending a lot of time is using a method called time driven activity based costing (TDABC).  Using this method, you simply figure out the cost of the support department, estimate how long each support activity takes, and then count how many of thise activities you do for each line of business.  For example, you could figure out what the cost of an hour of your sales department’s time costs, track how long you spend generating a half dozen proposals and calculate an average time to generate one.  Then count how many proposals you do for each line of business. A little simple math and you have allocated the appropriate expense to each line of business.

While TDABC can be much more complex than this, once you start tracking information at this level, the possibilities are endless.  You can start tracking the cost of a specific customer or specific job this way if you want to get that granular.  The real trick is figuring out the balance of the time spent tracking and the potential gains.  Don’t try to make the model perfect from the beginning.  Simply get something going and fine tune it over time.  Once you start doing this, you will be able to identify areas for improvment in the organization and start seeing where your excess capacity is which is where you can really start to see this pay off.