005 Why the Cost of Doing Business Online Keeps Falling (And How to Take Advantage)

This week we talk about the big shift in the cost of doing business online, and how your business will benefit IF you know what to look for. If you’re looking at growing expenses in staffing or doing business in general online, this week’s show is for you!

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Full Transcription

Hi I’m Tom Litchfield, Coming up on this broadcast…

  • The big shift in the cost of doing business online, and how your business will benefit IF you know what to look for.

If you’re looking at growing expenses in staffing or doing business in general online, this week’s show is for you!

Before we start the cast today, I want to welcome one of my newest clients. Dr. Debra Lane.

Dr. Lane is an internationally recognized expert on the issue of bullying, and has developed programs and conducts seminars on effective bullying prevention in education.

She advises government agencies, associations, and school boards on this important issue. She travels around the country and abroad conducting workshops and giving presentations to help educators learn how to prevent bullying.

Dr. Lane is also an expert on transformative leadership and does work in increasing teacher leadership and instructional roles.

I am certainly very proud to have Debbie as a client with all the important work she’s doing. She has a new website that I helped setup for her and I look forward to assisting her use the site to connect with educators and others who need her expertise.

I know some of my friends in education might be listening, and anyone else interested in the issue of bullying, please visit Debbie’s new website, laneleadershipgroup.com. That’s lane, l a n e, leadership group, all one word, dot com.

I’ll be sure to have a link the show notes.

Now let’s talk about the big shift that’s been happening in my world, the world of web development and WordPress.

These days, because of economies of scale, the cost and ease of doing business online keeps going down every year. And that’s because whenever there’s a mass-market for any product, like web services, it makes less sense to for companies to create that product just for you. Standardizing, systemizing, automating, and then optimizing the production process lets companies make more products more cost-effectively which in turn, makes them more money, but is also saves you a lot of money as a customer.

Imagine a company that needs a spreadsheet program like Excel for their employees. Should they hire programmers and spend 6 months to a year creating and testing a custom spreadsheet program? Or would they save a lot of money and time by licensing Excel from Microsoft.

Get Excel from Microsoft, right?

It seems insane that a company would create it’s own version of Microsoft Excel. But guess what—that’s what some companies did in the 80’s. Either they didn’t want to pay Microsoft’s licensing or wanted features Excel didn’t have, they spent hundreds of thousands of dollars in development, testing and updating their own software.

In the world of WordPress, you see the same thing. You can buy a theme that has hundreds of man-hours in development and testing on dozens, even hundreds of desktop and mobile devices for around $50. Thanks to economies of scale, you don’t need to pay designer thousands of dollars to build a theme just for you.

To give your site some functionality, like a shopping cart, contact forms, private membership areas, you can use plugins. And guess what, you can have the all functionality I just mentioned for free!

Less than 10 years ago, getting a fully functional, professionally designed ecommerce site for $50 was absurd.

I have worked on more than one ecommerce website that cost over $100,000 to develop. That was in the past. These days, I estimate conservatively that one of those projects would have cost a third to do, and the other even less, perhaps not even $5,000!

Think about that: from $100,000 to $5,000!

So for your projects, instead of hiring programmers or building a team, you should first ask yourself what products and services are out there that fill your need.

And if you don’t have time for that type of analysis, you find a person who will do the analysis and fill those needs using the products and services they recommend (and you approve).

The point is that you don’t always need a staff for your online business, so your mindset should be tools and services FIRST, a systems-first approach. IF you need someone to run these tools and services for you, THEN you look for someone to help you.

But before you make a move to hire anyone, you must do a complete analysis of your online business needs because the person you hire must fill as many needs as possible to maximize your payroll dollar. In fact, you may have to reevaluate and reduce or reassign the staff you already have.

The difference is that instead of staffing people to perform tasks, you hire people to build or run systems.

Here’s a simple example: Let’s say you have customer service reps that spends about 30% of their time, on average, answering common questions from customers who already have your product.

You could create a FAQs page on your site based on the most repeated questions your rep has to answer. The questions can be ordered by frequency and if the customer’s question is not on the list, they have the option to submit the question on the page or call your number. If they submit the question online, it will be automatically added to the list along with the answer.

What if after creating this FAQs system your rep’s time on common questions is reduced from 30% down to 10%? That’s a 20% time savings per rep! Perhaps you could reduce the number of reps or better yet, keep your reps but assign them to tasks or systems that help grow your business.

Here’s a great example of systems-first thinking that comes from this season’s reality tv show Gold Rush on the Discovery Channel.

On Gold Rush, gold miner Tony Beets bought a huge mining dredge built in the 1930s and considered obsolete.

I don’t know how to describe it, it’s like a big barge that digs for gold as it floats along. It was built in the 30s and it looks like an antique.

This guy poured over a million dollars into it to get it running.

Most people watching didn’t understand the move, including me, and on the show it’s known that Tony’s gold mining peers all think he’s crazy.

Yet, Tony’s vision became crystal clear in a conversation Tony has with a rival miner Todd, also creator of the show. This took place after Tony got the 80 year old machine running again.

{Soundbite: Todd talking to Tony}

Most mining crews have more miners, more heavy machinery, burn through more fuel. It all adds up to major daily expenses. On the show I think they said Todd spends about 4 to 5 thousand dollars a day and I think that doesn’t include wages.

Tony, on the other hand, found a way operate his business more efficiently. Yes, it’s a scaled down operation and his output is lower than other mining operations. But at the end of the day, he’s making a lot more profit.

Ironically, Tony is one of the best at traditional gold mining, with the heavy trucks, dozers, excavators and crews. But he saw an opportunity to eliminate all that and run an operation much more efficiently.

If you’re creative, have a large field of vision, you can find ways run your online business more efficiently.

How does this apply to your online business?

Let’s look at the landscape of website development as we close out 2015.

As a web developer for the past 13 years, I’ve built websites for clients or coded new functionality into existing sites.

However, in recent years, the amount of coding I do for projects has been steadily declining. The work is still there mind you, but instead of coding a project 100%, these days it might be 10% or none at all.  This is due to economies of scale that I talked about earlier in the show.

What this means for my clients is that they are getting better websites, done much faster and for a lot less money compared to the past.

It also means I’ve had to adjust my skills since I don’t make as much as I used to on website projects. But I’ve embraced this shift because I’m all about doing my work more efficiently.

When I was in the corporate world, I took pride when I could eliminate my own job. I found ways to automate my work, and through incremental steps eventually I reduced what I had to do manually, even as I was given much more work and responsibility because I was so efficient!

What I’m doing now is helping small businesses and nonprofits get their systems up and running and offering new services, such as marketing, social media, and SEO. I’ve had to master new skills to continue serving my clients. But to be honest, I’m having a lot more fun now that when I was a code monkey, so I’m loving the shift.

Your website developer or designer may not have this mindset yet, so it might be up to you to understand today’s online environment and evaluate how much value you’re getting from your web people.

I have some clients come to me with maintenance contracts from their web designers. Some were paying as much as $100 per month for website updates.

I’ve had more than one client, as part of their maintenance contract, send their web designer articles each month in the form of Word documents or emails for posting on their site.

The sad thing is that these clients already had a system for updating their site in place but were not using it. The labor of writing an article in Word is the same for writing it WordPress. So sending a Word doc to a web designer for posting is a complete waste of money.

As far as other tasks covered in these maintenance contracts, like plugin, theme updates, backups, these can all be automated.

For $100 a month what are these clients getting? Not much. Really, the web designer should be promoting the client’s website. That’s what business owner the really needs.

It’s just not enough to have a website anymore. The site has to carry some of the load and do some actual work for the business.

That’s why I include a range of services, including marketing, in my monthly services. Simply managing a site has little value these days, again thanks to economies of scale, so I’ve had to really think about what my clients need and how I can best help their business.

So the main takeaway here is to look at staff in terms of value to your overall business, not just your website. If you’ve analyzed your business and know where you can systematize, you can look for someone who can fill multiple gaps, not just work on your site.

If you need a help with your site, look for a person that can also help promote your business. In fact, look for a marketing person who knows WordPress instead of a WordPress developer who knows marketing. Make sense?

And that’s the direction I’ve gone in. I’ve switched from WordPress developer who does marketing to fulltime marketer who knows WordPress, because I believe this is what most businesses need.

Okay, we’ve talked a lot about systems-first thinking. So how do you go about systematizing your business?

Well, you can start by listing each process and component of your online business and asking yourself:

“Is there software or a service that can do this for me, or do it faster?”

Website updates, social media, order fulfillment, email marketing, product development, write it all down, then write down the processes and current steps within each process. Go through the list and question each item.

Next, search online for different services and products.  Better yet, talk to other business owners, successful ones that have similar tasks in their business and ask what they are using.

Beyond that there are other techniques to improve efficiency. One I like to use is called “task unification.”

Task unification is a technique where an existing component of a product, service or process is assigned an additional task or function.

My favorite example of task unification is in engineering: the regenerative braking systems, where the process of slowing down a train or car generates electricity to be used later. So hitting the breaks actually creates fuel for the vehicle.

Here’s another example that I made up. What if by typing on your laptop keyboard all day, the act of pushing on the keys generated electricity to augment your battery power. That would be cool, wouldn’t it? But probably not practical. The concept is still an example of task unification.

Another example is something Thomas Edison came up with. Apparently he rigged a fence latch as his home to a water pump, so when anyone went in or out of the gate it would pump water for his house.

I could do a whole episode on “task unification” and I might do that next season. For now you can search the Interwebs it to learn more.

I also look for tasks in my business that will produce multiple positive outcomes. That’s not exactly fall under the textbook definition of task unification, but it helps me prioritize tasks that have multiple benefits.

Here are a couple quick examples taken from my own online business:

I wanted to more traffic to my website. I also wanted more Twitter followers. I found that by following people on Twitter a certain way, I was able to grow my followers, increase the traffic to my site and get more leads for my business. I received 3 desired outcomes from a single, repeatable task.

Here’s another one:

Say you run a directory website with business listings. The businesses in your directory are there because they expect to get some traffic from being on your site. So to run a successful directory site you need traffic.

By promoting your directory site and getting traffic to it, not only are you making your current customers happy, but you are also increasing your own sales by bringing in new visitors, AND you are increasing the overall value of your site with the growing traffic and revenue, which to me is the most valuable benefit of the three.

I can go on and on about task unification but let’s keep this thing moving.

OK.

One last point I want to make about systems-first thinking, is that it doesn’t hurt for you to learn and understand how some things work online, like your website, instead of leaving it for someone else and being in the dark.

Actually, I really think it’s a bad idea if you DON’T understand how some things work online.

I’ve met many CEOs and business owners who needed my help with their ecommerce solution or their website yet had no idea where their site was hosted or who had the logins. Often the person who had this information was not in the organization anymore, or was an outsourcer that was nowhere to be found. This lack or organization always causes problems and delays projects. How efficient is that?

Some say you should remove yourself from business details and just focus on growing your business. Of course you should organize and structure your business so that you CAN focus on bringing in more business, but not understanding certain basics is a liability for your company.

That’s it for Techie Secrets this time around. If you have questions about anything we talked about on the show, please find me on Twitter for continued conversation on these topics and more. Simply search Twitter for @ tomlitchfield or search for hashtag TechieSecretsPodcast

Thanks and see you next time.

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