Technology is a Businesses Best Friend
It still amazes me that businesses are still reluctant to spend money on technology for their business. After visiting numerous businesses when undertaking an appraisal of its value, the first thing I notice is the lack of spending on hardware. This lack of spending only brings down the value of the business as buyers want a competitive business not a business still operating as if it 1980.
Big corporations continually update hardware and software on a scheduled basis, however small businesses see this as an expense they can save on. Small business owners nearly wait (or wait until it is too late) until their computers are dead and then decide to update it. Do not get me wrong, I am not saying that as soon as new computer comes out you need to purchase it, however it is a business owner’s responsibility to ensure their business is successful and part of this is achieved by having strong infrastructure being their computers and software.
You will see that I am not referring to computers as a capital investment. This is accounting terminology. This is how we recognise it in the balance sheet. From a small business owners view the computer should be seen as the hub that joins all the other parts of the business together to work efficiently.
So why are business owners so reluctant to purchase computers and software? It appears it can be put down to two reasons. The first is the computers are seen as an item that works in the background. 99 times out of 100 we turn it on and it does what we want it to do. It requires little maintenance and does not show wear and tear.
If you compare this to your motor vehicle – it requires regular maintenance and attention. If you do not maintain the vehicle it will have a short life. It also shows signs of wear with fading paint; dents and scratches and requires tyres. Then there is the repayments due each month and usually once the repayments are all made, it is time to replace the vehicle.
When we look at the vehicle and compare it to the computer – which one produces more for your business? Without the vehicle you can not get to appointments. Without the computer, you can not prepare the reports or bill the client. The vehicle lets employees deliver products. The computer makes sure the employee is going to the right place, at the right time and with the right product.
It is obvious you need both however the service the computer provides to your business pays back in excess of the vehicle when you compare their costs. Overall computers make the business more efficient and effective in how it is managed.
The second reason why owners do not spend on computers and software is they do not put the cost into prospective. Using the example of an employee paid $50,000 a year or $250 per day. So a computer costs around 6 days of an employee. If your employee is unproductive or slowed down – there cost to the business will exceed the purchase price of a computer.
Therefore it only makes sense that a computer is critical to the success of your business and its overall cost is minor. Over three years, the computer only costs approximately $2 per day and it works 24 hours a day – 7 days a week.
Big corporate know the pool of staff available is decreasing and the cost of staff is increasing. If you are trying to run a successful business you must maintain and regularly update one of your most critical assets – your computers and software. If you are trying to extend the life of computers and software each year by delaying their updates, you are probably wasting more in salary than actually replacing them.
In summary – do not skimp on one of the most important tools for your business. Use the technology to generate efficiencies in your business and its pay back period will be very quickly recovered.