07 Jan

Cheap IT to start a business (Part 2)

Friends ask me all the time: how much would it cost to start a business from an IT perspective, as in get a website, get email, phone numbers, an ERP system, a CRM system, some basic automation, etc. This makes non-techies very nervous when just starting out on the cheap. Word on the street is that these things cost millions. Interestingly enough, most people don’t know that they can do most of that expensive stuff for next to nothing, and a little elbow grease.

This article is not meant as an in depth how-to but more as an example of what you can get done with a little knowledge when just starting out.

Click here if you’ve missed Part 1 of this article

3. Phone service
Serious business needs business class telephony. Even if you are going to be doing business exclusively online, you will still need some phone service. I recommend the following requirements:

  1. Basic phone service (making and receiving calls)
  2. 1 toll free number (1-800 or 1-866 number in the USA)
  3. A digital receptionist (press 1 for Sales, press 2 for Accounts Receivable…)
  4. Multiple extensions so you can add remote people to your phone system
  5. Voicemail for each extension. Optional but nice: can send you voicemail to your email.

A few years ago, this would have cost you $30K+ to buy a PBX, plus lease lines from a large phone company, then getting someone to come in and configure the whole thing. Lucky for you, those days are over thanks to the prevalence of Voice Over IP (Telephone service through the Internet).

There are many companies providing “Virtual PBX” service. Here is a quick sample I collected from Google:

Some of these services will also let you make calls through your business number. This is usually charged in bundles of minutes. Read up on each vendor’s offering to see if they offer that feature if you want it.

The entry level price point for the all services we want from above seems to be around $10/month.

There are many phones that work with those services. They are called SIP Phones and start at about $50. Here is a quick Froogle search on SIP Phones. You can also use a regular phone if you buy a SIP to PSTN adapter. Here is a quick Froogle search on SIP to PSTN. Adapters are slightly harder to setup than a standalone SIP Phone, so choose accordingly.

4. Invoicing
I strongly recommend reading through the following website before you go any further: http://www.myownbusiness.org/s7/

Now that you have a domain name, a website, business class email, phone service, a computer and some office software, you are ready to start charging for your products and services. If your customers pay before they get their products, then invoices are not necessary for you. If you sell to companies, then you need to be able to sell on credit. This means you send them a price quotation->they put in the order->you send an invoice to their accounting department->you get paid.

I will divide this into 2 different approaches:

The easiest and cheapest approach would be to download free accounting software. Microsoft Accounting Express is the one I found easiest to use among free accounting software, but you can Google others. QuickBooks also has a free version, and it may be a wiser choice than Microsoft in the long run since your future accountant will most likely use QuickBooks. It is however a bit more challenging if you don’t have some accounting know-how.

Approach #2 is easily understandable to everyone but requires discipline and more work. If accounting software does not work for you, then the following is for you. Keep in mind that you will have to go for an accounting package at some point, regardless of whether you have an accountant or not. Invest in classes if you want to do it yourself, or better yet, get yourself a real accountant. They charge by the hour and are well worth the money.

There are 3 parts to invoicing. Making the invoice, delivering/tracking the invoice, and finally filing it so you can find it later. By always using the same document template, your customers will come to remember you and handle your payments faster. By always using the same delivery method, you can always tell if your invoice was received and who signed for it. By filing your invoices in an organized fashion, you will be able to quickly reconcile payments with the right invoice. Wether you do these 3 parts through MS Accounting, or Quickbooks, or SAP, or any other, you will still be doing all 3. Instead of files and folders, these software packages will file the invoices for you automatically. For delivery, some will automatically send email invoices, others will require you to print and mail.

Based on our 3 parts above, let’s design an efficient way to handle invoicing. If you are familiar with MS Office, then creating an invoice is as simple as downloading a document template from microsoft.com, fill in the blanks, and print.

Invoice Number

For the invoice number (a unique number to identify this invoice): let’s assume your first invoice will be 100, your next one 101, etc. To do this you need to remember the number you gave the last invoice you made, which is hard for most of us. What you can do is right click on your invoices folder, and click properties. The number of files will be displayed. Add 100 to that number and use that as the new invoice’s number.

Payment Terms: or TERMS for short. The number of days you give your customer to pay his bill before you consider them delinquent. This is usually 30 days from the time they get the invoice or “NET 30” (http://en.wikipedia.org/wiki/Net_30). Talk this out with your customers ahead of time.

You can invoice by email, snail mail, or fedex/UPS. This probably depends on your customer, but if you can, try to stick to one method of delivering your invoices. If you’re going to use Email, make sure you store the Sent invoices into their own folder in your email client. If you’re going to use Fedex or UPS, learn to use their websites to track your sent mail.

Here is a simple filing system for your invoices:
1. Download a Word or Excel invoice template from here and save it on your Desktop: http://office.microsoft.com/en-us/templates/results.aspx?qu=invoice&av=TPL000
2. Make a folder on your computer Called Invoices
3. Everytime you get a new customer, create a folder for that customer under the Invoice folder. Keeping all the invoices for a particular customer in its own folder will make your life easier later when we’ll talk about Accounts Receivable.
4. To create an invoice, open and fill out the template and save it into that customer’s invoices folder.

4. Taking it to the next level

That’s it folks! Nothing to it! Some free software, some low monthly subscriptions and you have all the IT you need to run your business for a while. Once you have an office, more than 5-10 employees and you want more features than you can get through the vendors and software you already have, you can spend money on a part time IT guy to start bringing it all in-house as needed. For most non-computer related businesses, you can probably get away with hosted services for the life of your business as long as you don’t grow past a hundred employees or so.  For technology oriented businesses, having in-house systems and integrating them to work together becomes part of your investment and may seriously speed up your reaction time to changes in the market place. If you plan to do business with large surface retailers, electronic data interchange (EDI) becomes a must and usually requires enterprise class software for accounting and order management. Companies relying on a large sales force to sell products or services would invest in an in-house or hosted customer relationship management package (CRM). The key here is to identify the IT that is most important to your particular field and spend your valuable dollars there. For everything else, take your time using cheap hosted services until you actually need more than they can provide, or know for a fact you can do it better and cheaper in house without wasting your time. Time is money, spend it well!

5 thoughts on “Cheap IT to start a business (Part 2)

  1. Great article – wish it had been around a year ago, but still good. In regards to the phone solution, I use the Virtual PBX product you mentioned in the article combined with a product called Gizmo, which converts my computer into a telephone. I use Gizmo so I don’t have to buy/maintain extra phone lines, and Virtual PBX gives me all the business class features I need. Both have been enormously useful for increasing my business’ capabilities without pushing costs up, and I strongly recommend them over some of the other competition I’ve seen.

  2. Thanks Daniel.

    I have also used X-Lite myself as a softphone and it works pretty well.

    Since you already use Gizmo, checkout Gizmo Mobile. With it, you can pickup calls from VirtualPBX on your cell phone (assuming it is supported).

  3. I actually use Callture as my PBX provider, and their service has been crucial in starting up my business. A virtual PBX is affordable and conveys the professional image you need to be taken seriously. For those wondering, I chose Callture because I was getting the most value out of their offering, I’m more than satisfied with their service after 1 year of use.

  4. If you dont mind, exactly where do you host your website? I am looking for a great web host and your website seams to be extremely fast and up most the time

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