17 Mar Has My Business Outgrown My Technology?
We get this question a lot from business owners in the middle of a growth phase. Often, they are already using systems for accounting and CRM (Customer Relationship Management), and they are not sure what processes could be improved, and if there is a business case to improve them.
Over the years, we’ve identified a number of clear indicators that it’s time to invest in technology. This can be in the form of implementing a pre-existing Software-as-a-Service (SaaS), implementing a platform solution, or developing a custom software solution. We’ll elaborate in an upcoming post on which of the 3 solutions is the right fit for you, but for now let’s focus on the “smell test” of determining if there is a need. Some are obvious, while others are more subtle.
1. Mountains of Paper
If your processes involve a lot of data collection via paper, and then workflows on that paper, it’s time to look at a solution to reduce the volume. This is very common with businesses that employ a lot of field workers.
- Errors – Any paper-based data collection is prone to errors and omissions.
- Redundant Data Entry – Some or all of the data collected will need to be digitized.
- High Cycle Times – Your process only moves as fast as paper.
- Labor Intensive Reporting – If your work orders are on paper, someone has to manually count them every time you want to know how many are open.
- Lack of Visibility – Until the information gets into the system, it might as well not exist, which means management is always a day behind in a real time world.
2. Field Employees Stuck at Desks
A company pays field employees to be in the field. If they’re wasting time trudging back to a computer to do double bookkeeping, they’re wasting double money.
- Errors – Working after the fact from memory or handwritten notes inevitably leads to bad data.
- Lost Opportunity – They could have had a client approve work while they were on site.
- Morale – If they came to work for you in the field, they’re probably happier and more productive there than riding a desk.
3. Email is a Purchase Order System…Wait, What?
One thing we actually like about paper is that at least you know there’s one copy of inspection #89348. When everything is ‘electronic’ but sitting on a File Share you have all the problems of paper and even more problems with version control. We see a lot of organizations that have grown up using email to move documents around and rely on convention to know where the right versions are. This works alright for a small team where everybody is on the same page and knows the conventions perfectly, but it doesn’t scale, doesn’t support automatic business logic, and doesn’t support real time data analysis.
4. Managers Don’t Have Realtime Access to Key Performance Indicators
If the Director of Sales can’t generate a sales pipeline on demand and the Operations Manager can’t produce a list of over-budget work orders, then Houston, we have a problem.
Siloed Software Systems
Using Salesforce for lead tracking and estimates? Great! Have an awesome Work Order system? Fantastic! Using an accounting system that most CFOs would drool over? Awesome! Are they connected? If not…
- See Paper List Above – You are now subject to some or all of the issues with paper-based processes.
- Conflicting Data – Does the data in your systems match? Oh, you need three days to reconcile? It’s okay, we’ll wait, but will your competition?
- Morale – Nobody enjoys spending 10 hours per month turning timecards from your Operations system into identical invoices in your accounting system.
Note: Use of MS Access databases tend to result in very siloed systems. When you have a small workforce these databases are invaluable but as the business grows, the Access databases tend to grow very poorly with it.
Cost and Revenue Grow at the Same Rate
As a business grows in revenue, it is very typical for the direct costs and overhead costs to grow at the same rate. However, if technology is utilized properly, the rate of growth of the overhead cost should be a lot less than the revenue growth.
Let’s use a scenario to illustrate: in 2016, Acme Widget Co.
- Revenue = $10M
- Direct Cost / COGS = $6M
- Overhead Cost = $2M
Acme increases their revenue to $15M in 2017. Acme is going to have to buy about 1.5X as much raw material to make widgets and 1.5X it’s factory labor force to make those widgets, so the direct cost is going to go up to $3M. Maybe they have more buying power and now it’s $2.5M.
This is where it gets interesting. If Acme invested in tech properly, then to support 1.5x the production the Overhead should only go up 10-20%. We’re talking about functions like accounting, admin, and field support.
For example, let’s take billing. If the operational system that tracks production feeds into the accounting system for billing, then it doesn’t take twice the manpower to process 200 invoices/month vs. 100 invoices/month.
The amount of work hours to realize a dollar of revenue is dramatically reduced, data only exists in one place in the system so decision makers are always up to date, and everybody involved gets to spend less time shuffling paper and more time doing their job. For a real-life example of how we accomplish these kinds of results, check out one of our case studies where we saved a staffing company for the equivalent of 30 hours/week, every week.
If you’re trying to figure out whether or not your company needs process automation, go through this exercise and sketch out how your overhead costs increase as your revenue increases. You can take it a step further and look at which costs without the Overhead double and which would grow slowly. For example, if you do this exercise and the accounting labor goes up 20% but the “inspections” required to go up 100%, maybe your inspection process is the one that needs automation. The key here is to use an extreme example of revenue growth to see where the pain would be.
We hope this gives you some things to think about. If there’s anything we can do to help, don’t hesitate to reach us here!