Creating an e-business summary

As we have discovered, an e-business truly does touch every department within a company. And a truly integrated e-business has optimized both its human and technology resources.

From forming a strategic business plan that incorporates traditional business practices with e-business solutions, to conducting a risk analysis and disaster recovery plan, ABC has many steps to take before it can be tagged a successful e-business. It must first develop a marketing strategy and ask itself fundamental questions regarding its operational success factors.

ABC must also create a financial plan that looks at past performance as well as future trends. E-business involves reducing operational costs as well as increasing sales. Finally, ABC must work to make its e-business solution work for the customer. The customer must ultimately benefit from the efficiencies that ABC and its business partners will gain from a well-strategized and implemented e-business campaign.

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Risk analysis and Disaster recovery

Along with the financial plan, ABC should incorporate a thorough legal study and a thorough risk analysis. These aspects cannot be overlooked, as they are the biggest defense an e-business company can have to protect its assets. ABC should first analyze its privacy and service commitment statements. There are important laws and regulations that explain how data is to be collected, stored and shared. ABC should be aware of the many resources available to an organization that explain and keep up-to-date on new laws and regulations.

ABC should also conduct a thorough analysis of its infrastructure. During this analysis there should be considerable time devoted to uncovering any weaknesses in either information storage procedures or the processes used to keep the website up and running in the event of a natural disaster. This is also known as a disaster recovery plan. And like any plan there needs to be documentation drawn out that highlights the weaknesses. Then a disaster recovery team can be assembled. There can be several teams for each area of recovery, but each team should have a leader. The team leaders are responsible for determining the problem, the root cause of the problem, finding a resolution to the problem and finally responding to the problem and fixing it. This scenario should be conducted prior to any ‘real’ disaster so that there is documentation available when the time comes.

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Reducing costs

Financial considerations should be given towards reducing the costs of operating the business. Even though most companies use the Internet to increase their marketing presence, there are many ways to lower operating costs by using the Internet and the technology advancements that the Internet offers. One way of doing this is to lower transactional costs. When customers self-service their accounts, they free up the customer service department’s time and the Sales departments time. This allows them to spend more time procuring additional sales. Further, EDI and XML transactions can be instituted to allow computers to ‘talk’ to one another and therefore alleviate human interaction and human costs. 

Another way to lower costs is to offer information online. This will decrease paper, ink, storage and management costs in the physical realm. Along these same lines, a company could reduce costs by offering online invoices. Companies routinely lose or misplace their invoices. Having an electronic version to send them will decrease time and delivery costs. Using e-mail to communicate with the customer and other business partners will reduce phone-call cost, but it will also serve as an electronic backup in case of further disputes. Also, when a company uses online suppliers to procure their goods, much of the ‘fat’ has been taken out of the equation and costs are typically lower by doing so. One way to buy online is through bidding sites. These sites can offer a company the raw materials it needs to operate, but it can also offer the machinery it needs as well.

Recruiting employees online can save costs as well. Doing research online can reduce the time it takes to come up with an answer. Another great advantage the Internet has in reducing costs is training employees or customers via the Web. Quarterly sales meetings can be conducted via the Web without the added time and expense of traveling. Plus, Webinars can be conducted to train users on using an e-commerce site or educating suppliers on the services offered by ABC in an effort to encourage them to push their products through ABC. These are many ways that the Internet can reduce overall company costs. These elements should be included in a thorough financial and accounting plan.

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Budgeting
 

Budgeting is important because it gives marketing and e-business management a greater vision of your expectations in relation to the rest of the company. A thoroughly planned budget can lead to reduced administrative costs and tasks, increased service levels to employees, and freeing up the finance department to focus on strategy, not spreadsheets. 

Another consideration for budgeting goes beyond an employee’s salary. There should also be consideration towards an employee’s bonus structure. An employee incentive plan is a very important aspect of creating additional revenues for a company. A budget should include an incentive plan for the e-commerce manager that would pay out if they increase overall company sales through online business transactions; if they decrease transactional time with regard to checking and approving e-commerce orders; and additional revenues gained from selling Web advertising and/or preferred placement within the program’s product search results.

Budgeting is also important because it allows management the tools to increase and decrease budgets depending on economic and other environmental circumstances.  During our next discussion we will speak directly about reducing costs.

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Operating expenditures

As with the startup expenditures, the operating expenditures involve employee time. The e-commerce manager, MIS, programmers, graphics people, and customer service representatives must all be involved on the operational side of an e-business. Further telecommunication expenses are incurred monthly or quarterly, as well as basic utility expenses. 

Advertising also comes into play on the operational side of an e-business. Literature and other ‘hard’ advertising pieces must be created. Pay-per-click advertising and e-marketplaces should be advertised in so that horizontal partners push users to your site.  ABC may also wish to conduct live web demonstrations of its capabilities. This per-month resource must be budgeted.

While some business costs can be reduced in the e-business environment, it is more accurate to say that money can be spent more wisely after e-business implementation as a result of better reporting, trends data, and better accountability for marketing dollars spent versus true customer acquisition, ROI and lifecycle earnings from a customer.

The budgeting process is just as important in the e-business environment, so we will discuss budgeting in the next post.

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A Complete View of Costs Associated with Starting an e-Business Enabled Company
 

Startup expenditures

Even though ABC is a successful brick and mortar business in its own right, there are many expenses associated with starting an e-commerce division of a company. For instance, there are development costs involved. ABC wants to offer its users a unique and industry-leading searching mechanism for finding cogs based on several criteria. This will require development time and money. Further, the graphical layout for the new site will have to be determined. This will primarily be done in house, but a portion of the finished style sheets will be imagined and created by an outside graphic artist. This will require an expenditure. 

A minimal, but necessary, charge will be incurred to obtain a domain registration for the new company division. This project will require time from the marketing manager, e-commerce manager, graphics artist, programming, IT and accounting departments. The time involvement from these individuals is an incurred soft cost. Also, equipment must be purchased in order to service users in an efficient and secure manner. A middle-ware server must be bought and put in place so that credit card numbers are not floating around on the Net. This middle-ware server will also act as a liaison between the e-commerce site and the back-end inventory and financial systems. ABC will also require an additional router, a new hosting provider, and more programmed jobs to run security backups of information. 

These are the starting expenditures that must be considered in a financial plan. Next time we will discuss the operating expenditures.

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