How to cost out your e-business efforts

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June 13, 2010

How to cost out your e-business efforts

Costing out your e-business project is a crucial step to take if you want to get it off the ground successfully. The exercise will ensure that you spend wisely and consider all your options to avoid making choices that could leave you stuck with hidden costs later.

There are 2 types of costs you will need to consider: direct and indirect.

Direct costs

Direct costs are high for in-house e-business initiatives in which a company buys all equipment, develops its own software and requires a high-capacity web connection to run its site. Large companies looking for a unique system and absolute control over security usually take this route.

Smaller firms usually prefer to outsource such work, not only because costs are lower—as little as a few hundred dollars in some cases—but also because it's easier to track down expertise they need. Another advantage of outsourcing is that a higher-capacity hosting service will sometimes be offered as part of the same package. And outsourcing still allows for some customization and control over a website's operations.

Often businesses will turn to application service providers, or ASPs, for this kind of service. ASPs typically provide everything from hosting and e-commerce services to assistance with office administration, sales, marketing and human resources management. ASPs allow businesses to choose only the services they need.

Some of these outsourced services for small businesses are available on CD-based software, but many are now available primarily on the web—typically for a low monthly fee.

Indirect costs

The indirect costs of an e-business initiative are often higher than the direct costs. They are usually incurred when managing software and technology that helps your business operate or when designing, managing and marketing your website.

If you're trying to plan for indirect costs, keep in mind that some indirect costs arise when you run a business outside a traditional office environment and must access telephone, email and messaging services through the Internet or via handheld devices.

Examine your business and determine what kind of communications management would best suit your needs. If you're in sales or some other form of communication-based business, mobile devices may be the best option.

Many entrepreneurs need to remain constantly connected to sources of information. Virtual office software, often available through low-cost ASPs, can allow a mobile operator to network with coworkers or allied entrepreneurs via the Internet. Low-cost software, sometimes bundled as part of a larger package, can also be used to connect a portable computer to a larger fixed terminal, allowing it to act as a field terminal.

Inexpensive software can also help you manage cash flow, payments, banking and accounting and even provide financial intelligence (shown in the form of online "dashboards") on sales, time tracking and cash flow.

Likewise, inexpensive software exists for task and time management. Busy entrepreneurs must often schedule their activities closely in order to be efficient. Scheduling and task management software is readily available to help.

  • Technology maintenance is another issue you will face. Computers, software, networks and other technology must all be maintained and serviced regularly. To do this, you can set up your own information technology (IT) department. That's likely the best route when your business is heavily dependent on technology and it's critical that operations always run smoothly.

    Contracting out is another option. Technology maintenance companies have sprung up to serve small businesses that do not need or want a complete in-house IT department. For a monthly fee, these companies will service your technology on a regular basis.

    Fee-for-service maintenance is more often used by very small operations to tackle problems as they arise. Such services typically charge a rate in the $100-an-hour range. Many are now able to provide service remotely via the web.

  • Website design and architecture is always a critical issue. Be prepared to invest time and money to create a well-designed, effective website. There is an art to guiding viewers through a website. Your goal is "usability" - the ease with which visitors can move around the site. Usability affects traffic and the overall effectiveness of a website.

    Put yourself in the place of people visiting your site. Can they find what they're looking for within 3 clicks? Is the purpose of the site immediately clear to any visitor? Are fancy, distracting graphics kept to a minimum?

    People peruse websites differently from printed material. A simple, direct writing style is required. Information must be easy to find and useful. Blatant sales pitches and requests for personal information at every turn will usually prompt visitors to leave a site quickly.

    If your website is complex or central to your business, it's worth spending a few thousand dollars on a site designer who can organize it to make it more effective.

  • Website management—the need to have a webmaster on hand to manage a site—is also a significant indirect cost. This job is often given to the site designer and can be contracted out or performed by someone in-house.

    A webmaster's goal is to keep the site dynamic by regularly adding useful content (such as tips, news or information on training) to encourage repeat visits. This is especially important for business-to-business service websites that are used primarily for generating sales leads. Have someone in your organization find or develop fresh content, or outsource this task. Marketing firms sometimes offer this service for a monthly fee or charge fixed prices for developing material.

    Traffic patterns should be monitored continually and changes made based on patterns observed. Rarely visited pages should be dropped or downgraded, for instance, while heavily used ones should be made easier to access and used to inspire creation of new, similar content.

    User tracking and analysis software is widely available, often as part of hosting packages offered by Internet service providers, to identify how visitors found your site and what they did while there. As well, private providers such as OneStat, Webtrends and many others can help entrepreneurs track the number of visitors to a site, their geographic location and what led them to the site. For individual customers, meanwhile, these tools track patterns of behaviour. That in turn can help you assess the effectiveness of your marketing.


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