Let's talk business; ask yourself, "if I don't integrated computers into my business, how will I compete?" Dale Blanchard.
Let's Talk Business
At the end of last month's column I said I intended to start this month with the question of whether to computerize at all. Then I wanted to explore the concept of the computer as a tool. In a wild burst of optimism, I thought I might get as far as looking at some word processing programs.
Should You Computerize?
Let's start with the question of whether to computerize at all. That is not a trival question. Look around you; everyone is doing it. You ask yourself, "If I don't integrate computers into my business, how will I compete?' Let's think about your business for a minute. You provide either a product or a service. You charge for whatever you provide.
As you look at your competition, what can you do to make more money? Let's assume you manufacture a product. You have three choices:
If you have competition, you probably have ruled out number one. That leaves you considering the last two. How can a computer help you sell more of the same product for the same price? That is a question you will have to answer for your specific business, but here are a couple of ideas:
Selling Or Producing More
You might use a computer to make your sales force more efficient at following up new leads or at following up with your existing customers on a better schedule. The computer could tell you how much of your product a particular customer uses in a given period of time. This, of course, requires a program designed to do that.
One which comes to mind is Leads by Datamotion Associates, 795 Pine St. #42, San Francisco, CA 94108. This program provides you with a good way of listing your customers, gives you a diary of when to get back to them, and allows you to make notes about your last contact, which might include how much of your product the customer bought. There are other similar programs which your local computer store may be able to show you.
In some operations the computer might actually allow you to produce more of the same product by streamlining your operation. You might analyze your work flow to see where things slow down, thus limiting production. Ranches and stock feeding operations have shown the ability to increase beef and other meat production by using computers to determine the most efficient feeding schedule and food combinations.
Lowering Production Costs
Back in the olden days, which I often refer to as my previous life, I introduced word processing into my business. Those of you who read last month's column know I did it because I was a lousy typist and that was the only way we could provide professional-looking reports to our customers. A happy by-product of the word processor was efficiency. When we got big enough that we could afford a secretary, we soon realized that we had only one. Most of our competition, companies of about the same size, had two, sometimes as many as four, secretaries.
Secretaries are expensive. Let's say you pay yours $1200 per month. When you add matching social security taxes, vacations, and other benefits the cost of that secretary is more like $1560 per month. That's $18,720 per year. You can get a good word processing steup for around $4000. If adding a $4000 computer-printer combination means you can avoid hiring another secretary, you save over $14,000 the first year. You can use that $14,000 to lower the cost of your product, thus allowing you to capture a larger percentage of the market, or you can simply pocket the profits.
Small manufacturing companies sometimes lower their production costs by using their computers to get control of their inventory. By analyzing their actual needs they are able to buy only what they need and are often able to anticipate their needs in such a way as to be able to take advantage of price specials from their suppliers. Either way, they pay less, thus increasing their profit margins.
Accounting is another area in which companies can save large amounts of money if they use computers intelligently. When I wrote the forerunner to Mini-Ledger, the bookkeeping system we use in our business, I found that we were spending about $1200 per year in accounting costs. One night I was sitting with the owners of two similar companies of about the same size. I found that one was spending about $3000 per year, and the other was spending about $4500. We were able to spend much less because we gave our accountant organized records from which he was able to prepare our taxes and other reports in a very short time.
Computers Are Not For Everyone
Recently one of my friends asked me if she needed a computer. She is a vocational counselor who has people referred to her by insurance companies. The runs a small office with one not-quite-fulltime secretary. We talked for a few minutes about her operation and found that a computer could probably increase her efficiency in the following areas:
Word processing. She writes reports to insurance companies and many letters to a variety of people. Her reports tend to follow the same format, so it would be efficient to have these formats stored on the computer. Her letters are also similar enough that she could use a standard format. Currently, she dictates her reports and letters, and her secretary types them on an electric typewriter. With word processing, she would still dictate, but parts of the letters and reports, such as headings, could be used over and over, thus saving typing time.
Billing. My friend bills hourly for her time, and once a month or every time she sends a report, she also sends a bill to the insurance company. It would be nice to have the computer figure the bills, keep track of her receivables, calculate how much income she has each month, etc. Now, her secretary makes up the bills on the typewriter, does the calculations on a hand-held calculator, and enters the amounts in a ledger. When checks are received, they are checked off in the ledger.
Accounting. She thought it would be nice to have the computer keep track of her expenses in an orderly way, so that at the end of the year she could get her taxes done more cheaply. She presently uses a SafeGuard One-Write system and gives her books to the accountant at the end of the year.
Database management. Part of my friend's business it to help people find jobs. It would be nice to keep some kind of database of the places where she has found jobs in the past. This would make it easier to go back to these same employers to see if they have any current openings. Currently, her secretary keeps a card file.
Then we started talking about her not-quite-full-time secretary. This secretary has been with her for almost four years and is happy working about three-quarters time. I estimated that if my friend were to get a computer, she would eventually be able to get by with a half-time secretary. "But I couldn't keep her at half time,' my friend said. "Doris couldn't afford a pay cut, and besides, I doubt if she would be happy working any less.'
That meant my friend would have to:
We both concluded that she was probably better off without a computer. Her business was pretty much as she wanted it to be. She had time to spend with her family; her secretary was happly the way things were; and there was really no good business reason to buy a computer. There were several good reasons not to.
An Interesting Mistake
In last month's column I said that when I got into computers I eventually made enough mistakes that people began to think of me as an expert. Let me tell you about one of my more interesting ones. At that stage of my life I had four counseling offices in four different cities. I was in the main office and the other three were much smaller. One, however, was big enough that we needed a full-time secretary.
In that office we had a Lanier word processing system which we used for word processing, billing, and part of our accounting needs. The Lanier was a beautiful word processor, adequate billing machine, and a not at all adequate accounting machine. Because of the Lanier's inadequacies in these last two areas, Carol, the secretary, was having to really hustle to get everything done.
I had written a billing program and an accounting program which we were using in our main office. We couldn't use them in that office because they wouldn't run on the Lanier. We finally decided to sell the Lanier and put in an Eagle computer. We would lose just a little efficiency in word processing, but would gain immensely in billing and accounting.
We finally found a buyer for the Lanier and a couple of weeks later we were up to full speed on the Eagle. Billing for the month on the Lanier had always taken at least three days--sometimes as many as five--during which almost nothing else got done. With the new system, billing for the month was reduced to one day. Accounting with the program I had written took about three-quarters of the time it had on the Lanier. And suddenly Carol was doing needle-point.
A Computer In Your Business
So what does all this mean for you? First off, I think the efficiency of most businesses can be improved by the intelligent addition of a computer. What you have to decide is whether that increased efficiency will allow you to produce more profit from your business.
There is one more story I want to tell about how the addition of a computer could damage the profitability of a business, but I think I'll save it for next month.
Since I didn't get to talking about the concept of the computer as a tool, I'll try to work that in. Also, I want to talk about some traps to be avoided when you add word processing to your office, and again, if I have the space, I'll try to look at some word processing programs.