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Why Most SMBs Never See a Return on Technology Investments

Politicians love to throw around the phrase, “small businesses are the backbone of the American economy.” Despite the inherent skepticism, this phrase could not hold more weight than it does today.

With the rapid advancement of technological applications, the playing field between corporate giants and small businesses have been leveled.

Industries that once had extremely high barriers to entry, such as hotels or taxi services, are now at the mercy of the companies that innovate the quickest. Companies like Airbnb and Uber have embraced the growing trend of mobile technology to completely disrupt their industry.

Looking back over the last decade, it is amazing to see how many large organizations fell victim to disruption, leaving their company irrelevant and in ruin.

R.I.P. Blockbuster, you are missed.

Technological disruption is one of the largest competitive forces in the business world today. Consequently, more and more companies are prioritizing IT as one of the most essential components of their organization.

Investing in new technology is arguably the best move for your business to make. However, many small businesses fail to make a return on these investments because of the complex and ever-changing nature of tech trends.

Carefully measuring both the quantitative and qualitative effects of a tech investment is a difficult task, but it is absolutely necessary if you wish to make an actual return on any investment you make.

Quantitative Costs

The most common and easiest way to find the return on an investment is by weighing the monetary costs versus the monetary benefit. For example, let’s say you decide to invest in a CRM application, such as Salesforce, for $500 a month. After three months, you find that your sales revenue increases $3000. Simply subtract the total cost from total revenue to get your net gain ($1500) and divide this by the total cost. Congratulation, you just made a 100 percent return on your investment.

This does not, however, take into account costs for training, implementation, installation, etc., which all need to be taken into account when weighing the total cost of an investment. Having a complete picture of how much an investment is going to cost is the first step to ensure a return on your technology investment.

Qualitative Costs

One of the most difficult costs to measure are the ones without a price tag, such as opportunity cost, productivity and customer/employee satisfaction. However, if you are looking to find the true return on your technology investment, it is imperative that you find ways to measure these.

You must ask yourself questions such as, will this investment save staff hours? Will it increase our customer base or competitive advantage? Most importantly, will this tech ultimately make your organization more effective?

Answering yes to these questions ensures that the qualitative costs are worth the risk. Even if you find that the monetary costs exceed monetary value, you can still have a positive ROI based purely on qualitative benefits.

Approaching Technology Proactively

The final issue many small businesses have regarding making a return on their technology investment is the fact that they act reactively instead of proactively. If they see a certain application has worked for another organization, then they’ll risk the investment. Oftentimes, though, this happens too late.

Managed services is the best way to combat this reactive approach. It’s hard for small businesses to keep up with tech trends, especially if their industry has nothing to do with technology. Managed Services Providers (MSPs), monitor a company’s computer systems, offering support in real time and keeping an organization up to date in terms of technology. This third party offers new ways to disrupt your industry with technology. Due to the complex nature of choosing the right applications to invest in, having an expert on your side is a worthy investment in and of itself.

Understanding the real costs and benefits by investing in new technology is essential to determining whether you will make a return. Sometimes, however, these costs are hard to weigh. But just like you hire a financial advisor to manage your monetary investments, maybe it’s time to seek an expert to manage your technology investments.

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