How Small Businesses Can Prosper by Using e-business by Bill Dueease As published in The SBA’s Business Success Magazine, May 2000
Copyright © 2000 by Bill Dueease What is e-business and e-commerce anyway?
There are several definitions of e-business and e-commerce. The "e" refers to the word "electronic." One definition states they are interchangeable and both are defined as conducting transactions: 1. between business partners, 2. within an organization, and 3. with customers, by using the "Electronic Communication Medium" of the Internet and individual computerized networks. Another definition holds that the above definition is for e-business only, and that e-commerce is just the part of e-business where money changes hands through the electronic medium. In this article, we will use the second definition with e-business encompassing all forms of electronic transactions and e-commerce encompassing the exchange of money only. In essence e-business refers to the new channel (medium) of communication, just like radio and TV were at one time.
Why should small businesses even bother with e-business in the first place? By utilizing e-business methods you can obtain additional profits that were not available in the past.
It's easy to forget that e-business came into prominence within the past 5 to 7 years and is still in its "Trial and Error" infancy stage. In the past, small businesses accomplished the transaction processes between business partners, within organizations or with customers using voice and fax telephonic transactions, and mail. Small businesses can now choose new e-business solutions to augment or replace some existing methods and practices to improve their profits, without becoming a Dot Com business. Unfortunately, there is a common feeling that a business must have a website to conduct e-business. Today there are other e-business methods that are less expensive, easier to use, and are more effective than having a website. Small businesses are increasing profits by using e-mail, logging onto websites of others, and networking computers.
"A new study by the National Federation of Independent Businesses found that 83% of small companies have computerized their operations, 16% have a website, and only 7% use the Internet to market their companies. When it comes to using the Internet for personal or business purposes, 62% of business owners log on."
(See "Small Businesses Slow to Venture Online," 7/24/00, at www.smallbusinessdepot.com Thus, approximately 84% of small businesses have no website, approximately 93% of small businesses do not use a website as a marketing tool, and approximately 38% do not use the Internet at all. Who are the big users of websites? Maybe it's the larger corporations, public organizations, and actual Dot Com businesses.
Let's compare some of the reasons why larger corporations and organizations jumped on the bandwagon to create their own websites and most small businesses did not. Corporations conduct enough transactions to have the economy of scale that justifies their investment in a website. Small businesses do not. Corporations have the considerable money and resources to invest. Small businesses do not. Corporations either marketed or sought to market to the global community and their website provided a new medium to do so. Small businesses market primarily to local and regional markets. Pressure on corporations to jump on the website bandwagon was fierce, especially when the Dot Com euphoria was at its peak. Small businesses also felt this pressure, but to lesser degrees. Virtually all initial website products and services were directed at large corporations, and not to small businesses. Apparently, most small businesses have decided that having their own websites would not generate enough profits to cover start-up and maintenance costs and have sufficient profits left over to justify the exercise. In other words, it must provide the desired Return On Investment (ROI) for it to make business sense.
Eric Olesen, President of O & H Danish Bakery in Racine, Wisconsin (www.ohdanishbakery.com uses a computer network and website to manage their ever growing mail order business, which features their world famous "Kringle." Eric believes they are very successful because they "started small, kept it very simple and only invested in something that would pay us back." O & H Danish Bakery evaluated new computer systems, website updates and enhancements with a sharp eye on what the profit and return on their investment would bring back to the bakery. Each step they took reduced their costs and increased the volume of business, which allowed them to further invest and reap even more profits. Using this approach has allowed them to continually improve and expand from a position of strength, without over extending themselves. At the same time, they are able to provide the quality products and services their customers have come to expect and enjoy.
Do you have to be a "techie" to profit from the new e-business services? No, for the same reason you don't have to be an auto mechanic to get the full use and benefits from driving a car. Small businesses can benefit by investing in and using the e-business solutions to acquire new customers, retain existing ones at a lower Net Cost than was previously possible and reduce other existing business costs. However, it’s important to remember that approximately 38% of business owners do not log on and an even higher percentage of potential customers are not connected.
Four ways small business owners can USE e-business to prosper are e-mail, creating their own website without the e-commerce exchange of money, networking computers, and using the websites of other businesses. The key factors in evaluating the new e-business solutions are: cost of set up, cost to operate, speed of communications, accuracy, security, schedule (timeliness), coverage, and productivity. The following chart assumes very business has a telephone, fax machine and a computer capable of accessing the Internet.
Medium Set up cost per Speed of accuracy security time to cost transact. transfer of info of info execute v. phone $0 $.06-$3.60 .1 sec. v. good good 1-60 min.
fax $0 $.06-$.60 1-10 min. excellent v. good 1-10 min.
e-mail $0-$40 $0-$.04 0.1-3.0 min. excellent fair-excel 0.1-3.0 min.
have website $300-$12,000 $.01-$35.00 0.1-3.0 min. excellent fair-excel 1.0-12.0 min.
visit sites $0-$40 $0-$.04 1-60 min. excellent fair-excel. 0.1-3.0 min.
postal mail $0 $.34-$25.00 2-8 days v. good v. good 1-45 min.
pvt. carrier $0 $3.75-$30.00 1-5 days excellent excellent 1-45 min.
network $500-$10,000 $0-$.05 0.1-2 sec. excellent fair-excel .01-8 sec.
The e-mail method of e-business is probably the most established, easiest to use, and has produced the most profitable benefits for small businesses. E-mails are very effective because you can refer to and return messages already sent, and attach other documents to the message. E-mails can be retrieved and sent very quickly, with virtually no intrusion, and from virtually any place and at any time. E-mails are easy to record, store, and retrieve and require no paper or physical handling. They can also be converted to paper documents. E-mails offer an effectiveness and efficiency not easily matched by existing methods in that a single message can be delivered to a large number of recipients at one instant. Although some of the subtle communication opportunities offered by voice calls and personal contacts are not directly available through e-mail, its very informal style can be very effective in communicating emotion.
Some of the effective ways to use e-mail are: send and receive orders or confirmations. You can broadcast new information to potential and existing customers via newsletters or timely announcements. New potential customers are added when they sign up to receive your announcements or newsletters, but when they register for the acquisition of your products they become a customer. (Don’t ever forget that the best potential customer is an existing customer.) You can receive and respond to inquiries and include promotional materials, product information, agreements, and ordering information. The beauty is that many of these e-mailing activities can be done automatically using auto responders. An auto responder software program automatically sends a response e-mail to the sender as soon as the e-mail is received.
John Harris and Jill Nicol, the owners of John and Jill's Bakery in Novato, California (e-mail: jjcheesecake@mindspring.com) have been baking and delivering their unique cheesecakes around the world for the past 6 years, without a website. Over 50% of their cheesecakes are orders from Japan and Hong Kong; the remaining orders come from food service companies, restaurants, hotels, etc. in California. They have been using e-mails for the past 1.5 years to communicate schedules, prices, specifications, and agreements with their foreign and domestic customers. E-mail allowed the bakery to overcome time zone differences, language issues, mailing delays, recording needs, and greatly reduce administration hassles and confusion. Jill has also been surfing the websites of other businesses to research information on parts, supplies, and raw materials. She has taken full advantage of the wealth of information, opportunities available, and the ease of shopping for the best arrangements for her business. Their business has grown over 35% in the past year using these methods but their costs have not risen accordingly, because they have little need for administration and purchasing departments. Jill explained the cause for their successes when she said: "The quality of our cheesecakes and services have been the driving force behind our growth. Although we have been pressured to get a website, we have prospered without one, and we see no reason to get one soon."
Using the websites of other businesses to acquire their services and products is also another very low cost and effective method small businesses can use to increase profits. Small business owners are blessed today and will be even more so in the future, because they can use the websites of other businesses to develop outsourcing relationships. Doing so will reap almost instantaneous rewards. The capital needed to fund physical and human investments and growth can be greatly reduced, by having access to virtually the whole world. In fact, owners can easily profit by becoming customers of the millions of other businesses with websites who are actively seeking them. Why jump onto the risky bandwagon of building a website to fight for "customers" when you can prosper even more by becoming the "customer" every one is fighting for.
Outsourcing has been done for decades, and now e-business is accessing the world with just a simple click. Small businesses can easily order parts from Indonesia, Germany, and Mexico, have them delivered to Texas for assembly, and further delivered to their customers, or to their own place of business in California. These opportunities are easily discovered and consummated by surfing the web and using the sites of other businesses to outsource certain functions like manufacturing parts, assembly, and delivery. Outsourcing can greatly reduce personnel problems, eliminate inventory costs, reduce delivery problems, and provide a clear-cut knowledge of your operating costs. Small business can also outsource their employee administration needs to web based companies, who in turn develop employee manuals, administrate 401k plans, administer time sheets/payroll, and process Federal filing requirements.
The opportunities for small business to take advantage of the many different outsourcing products and services offered by others on the Internet has never been better, and promises only to improve. The latest direction of website companies is to focus on B2B marketing. B2B stands for Business to Business. Companies are recognizing the overwhelming small businesses market and are now providing solutions for small businesses that were not available just a few years back. Whatever needs or solutions small businesses might have, there are undoubtedly many different profitable products and services being offered somewhere on the Internet. It's just a matter of knowing what you want and looking for it.
Laura Bowly, one of the partner owners of Sierra Nevada Adventure Co. (www.snacattack.com in Sonora, California wanted to "add a service to their website so they would stand out from other sites." Sierra Nevada sells and services outdoor mountain gear, including canoes and kayaks. Laura wanted to provide a program where viewers could determine which canoe or kayak would be the best for them. However, to do this required a specialized data based search engine program. Laura surfed the web until she found a site that provided a similar type service, and e-mailed the developer of the search engine, who happened to be in Japan. He was able to modify his existing program to meet her specific requirements and deliver exactly what she wanted in only 7 days. Not only was she able to view and test the program before acceptance, but also all communications were handled by e-mail. "I saved several thousand dollars and 3 months of headaches" by not having to find someone who could and would write the whole program, and "it works so well that I have been able to maintain it without further help from the developer."
Small businesses can also USE direct computer connections or networking with their businesses partners instead of using their websites. Since approximately 83% of small businesses are computerized, networking their computers within their business and with outside business partners will be less difficult than probably expected. The easiest and least expensive way to network business computers is to use the Internet as an "electronic medium," which can be accessed from anywhere at anytime. There are other direct methods of networking computers that are also very easy to set up and operate.
Using a website to conduct e-business can be an effective way for businesses to tell their story to millions of people around the world. The site can be revised and updated frequently. A website can describe the products of a business, with color pictures and even video. Of course, the website can also be used to conduct e-commerce, where money exchanges hands allowing viewers to make a purchase, complete with payments using secure credit card transactions. Another way to look at a website is that it is an electronic, constantly changing, interactive information center for customers.
There are three reasons small businesses build their own website. The first is to create customer contact or business traffic, which is the first major step in acquiring customers. In essence you are paying for potential customer contacts that entice the viewer to contact your business and learn more. The second reason is to reduce existing costs. This is normally done by having your website perform existing business functions in a less costly and more effective manner. The third reason is to complete a sale, by building an e-commerce site where money will change hands. This last reason entails attracting the viewers, convincing them to become customers, enticing them to actually make a purchase, and getting them to transfer money before receiving the products. The purpose of an e-commerce site is to fulfill almost all of the sales process including collecting the funds. Now you can see why e-commerce websites are so appealing. However, e-commerce websites are far more complicated and expensive than they appear and can soon become the overwhelming focus of the business. It’s important to remember that websites are a marketing tool and should be evaluated just like another marketing opportunity prior to implementation.
Once you have determined you need a website and what its business purpose is, you will need to attain an appropriate "domain name." The domain name is the permanent Internet address for your website. Next your site has to be connected by an Internet Service Provider (ISP) to a server (computer) that lists your address on the Internet and maintains it for you. Normally, your e-mail address can also be associated with your domain name.
If you want to profit from a website, people have to be enticed to visit yours out of the millions of sites that are out there and the thousands being added daily. Advertising your site is critical to its success and your profit line. If no one visits your website, no business contacts will be generated, and all of the money and time developing it will be wasted. The cost of maintaining an advertising program to attract people to your site can get expensive. A rule of thumb for website advertising directed at attracting potential customers is that you have to spend far more on advertising than the total costs spent on developing and maintaining the site. Now you see why many small businesses choose to spend their advertising dollars on enticing customers to contact the business directly, versus using websites as a marketing medium. However, the costs of promoting websites are dropping to allow small business owners better opportunities.
Camille LeVasseur, owner of Blissful Blankets in Vacaville, California (www.blissfulblankets.com has been manufacturing and selling very unique Berber fleece blankets throughout the United States for the past 4 years. She intentionally created her business to utilize e-commerce from the beginning, but has attributed her success to using the e-mail system to its fullest. She stated, "We could not run our business without e-mail. When our business began sending customized rapid e-mail responses to inquiries about the blankets, business skyrocketed." She also uses customized e-mail to confirm orders, schedule deliveries, and educate customers on the value and uses of the blankets they have purchased, which exceeds her customers' expectations, and has drastically reduced communication costs at the same time. Promoting her business through e-mails has been the only e-business method she has found effective. Camille says, “The myth that other Online methods to promote a website are fast, easy, and cheap is simply Not True. To create a successful e-commerce business, you should devote 20% of your budget to website development and 80% to promoting it for a minimum of 2 years which is a big hurdle”. Camille greatly reduced her promotion costs by maximizing e-mail communications and using traditional marketing and promotion practices.
The cost to build a very basic 5 page, written text only website and with one access click allows a potential customer to send an e-mail to the business will range from $300 to $1000. Monthly hosting costs will vary from $19.00 per month to $80.00 for this basic website. There should be no additional transaction fees. Viewers can take as long as they want to view your site, they can also print your pages, and do this from anywhere at any time without interrupting normal business operations. Websites are fairly secure unless hacked. The promotion costs to actually attract viewers to your site can range from $200 to $15,000 per month. The cost depends upon who and how many viewers you want to attract.
Many of the e-business promotion methods you can use to successfully entice viewers to your site are discussed in more detail in the article entitled "How Small Businesses can get their own Promotional Website without being Taken," also by Bill Dueease.
One of the best ways to reduce costs is to set up a website for internal use only that is accessed by your employees, other business partners, and suppliers. Normally these websites contain special information needed by select users to do their job and are frequently password protected. There are no advertising costs involved with these websites because you do not want the public to visit it. If they did visit it all they would see is a screen, which is password, protected. The costs to build a very basic 35 page website for your sales force, other field employees and partners which contains a description of your business products, their inventory availability, and their latest prices and has the ability to send an e-mail to the business, but no other transactions with the business will range from $2,500 to $12,000. It’s imperative that this site has an easy and very secure method to transfer all information, and must include a tight password entry process that permits entry to only those selected by the business. The cost to set up this type of site is higher due to the additional pages, the security system, and the downloading and formatting processes required. The basic monthly hosting charges could range from $20 to $200 per month, since the site will require more service and capacity. Someone has to maintain the site and the security system so that additions, changes and deletions are processed in a timely manner. These maintenance costs will normally be greater than what a small business is currently paying to conduct the same transactions using existing methods. However, if the frequency of these transactions becomes greater using the new method the costs may be justified.
Christopher T. Spiro, the President and CEO of Spiro & Waites Advertising, Marketing, & Public Relations (www.spiro-waites.com in Fort Myers, Florida, which offers all of the above services with a special focus on building brand recognition, provides his customers some exemplary benefits through his "information based website and e-mail." Chris explains; "our clients participate in the full process of developing their TV, radio, print ads, brochures, and even in retail store advertising and promotional pieces from start to finish in much less time and at lower costs than before. Our process greatly reduces poor communication and any confusion between our clients and the agency and gives the client a personal pride of authorship in their final advertising product." After learning what his clients think they want, Chris digitizes the concepts, raw footage, graphics, or print options, and posts it on his website. He provides his clients with the special website address and a password, so they have private access to review it on their own time, by using easily available shareware programs. TV and other video footage includes time coding, so his clients can see for themselves the length of any scene, to adjust for specified time limits. His clients tell him (normally by e-mail) the scenes or parts they prefer based on the time coding, he makes a rough-cut and re-posts at the same password protected address. After further review and discussion with his clients, he produces the final version including music and voice-overs, if appropriate, and posts it, for his clients’ final review and acceptance. Chris further explains: "we are able to concentrate on actual productive work and save over 30 hours for each project, which translates into a savings to our clients of approximately 20% on the entire project, and also speeds up turn around time by 50%, because of the simple special use of our website."
If creating profits continues to be the focus of a small business when USING e-business, you can enjoy the most adventurous and profitable ride of a lifetime. Remember you can increase profits through e-business when: 1. You treat it for what it is, a new method for conducting transactions, which can augment and improve current transaction methods, 2. Always focus on generating a Net Profit when using the new process, 3. Avoid the urge to "jump on" the website bandwagon, 4. Focus on what it can do for your existing business and don’t get caught up in becoming a "techie" or Dot-Com business, 5. Explore and use the extremely effective, low cost e-mail system, and 6. Explore and use the websites of others, to outsource many of the hassles and processes of your business, 7. Explore and use compute-to-computer connections and networks that can contain HR/Benefit information, product information, sales aids, pricing data, inventory records etc., 8. Get your own website when the cost of doing so increases your volume of business, covers the associated costs and generates sufficient Return on Investment, 9. Focus on generating customer contacts and/or reducing costs through your website before jumping into a full scale e-commerce program, 10. Be sure to plan for the additional expense and effort required to promote your site.
One of the greatest values of using e-business tools is to improve the personal touch with your clients, as previously demonstrated by John and Jill Bakery, Blissful Blankets, and Spiro & Waites.
As you can see, your small business can greatly benefit in numerous different ways by using e-business methods. Give it a go!
Provided as an educational service by Bill Dueease of The Coach Connection. Bill Dueease is a professional business coach and co-founder of The Coach Connection; LLC where “connecting great people with great coaches” is their goal. You may receive a free copy of the article “Get Your Ideal Position: Go to Play Every Day” by contacting The Coach Connection at 800-887-7214 or 239-415-1777 or coaches@findyourcoach.com, or at www.findyourcoach.com
How Small Businesses Can Prosper by Using e-business - To learn more about this author, visit Bill Dueease's Website.
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