As a small to medium sized business, your technology budget is precious. You can’t afford to squander money on solutions that don’t deliver real business benefit – and in the middle of protracted downturn, you’re probably more careful than ever about how you spend your money.

Yet there is a wealth of solutions that could enhance your business. So how does one go about choosing them? By remembering that technology is only truly useful to your business if it allows you to increase your revenues or decrease your costs. The worth of any technology to your business should be benchmarked against those goals.

No longer should you be seduced into buying a solution just because it’s new or to keep up with the Joneses – any solution you acquire must be measured against a clear business objective. Smaller businesses should probably take care not to buy into technologies too early in the hype cycle, but wait for them to offer tangible benefit. At the same time, you shouldn’t be left behind by technologies that could make a difference for your business. Keeping that in mind, what are the trends to watch for in 2010?

One element of your business that you should certainly be looking at is your online presence. According to the latest statistics from respected research firm World Wide Worx, more than 10% of South Africans are now online (some 5 million) and the number of connected people can be expected to double over the next five years.

Falling data costs (a gigabyte of ADSL data costs far less than it did just a year ago) means that your customers will do more online in the year to come and that you can do more online as well.

You don’t necessarily need to be setting up a major electronic commerce portal – that depends on the business you’re in – but you should be looking at what people are saying about your business using social networking tools like Twitter and Facebook and on customer service sites like HelloPeter. It’s an easy way to keep tabs on what your customers are saying and to respond to them, and the only cost is a little time.

In addition, you should also try to set up a web site if you don’t already have one and ensure that it’s up to date if you do. Thanks to innovations like Google AdWords, the online world also offers you some economical options for advertising.

Another important technology for the year ahead is mobile communications. Smartphones are finally at a point where they are easy to use and offer decent battery life; what’s more, data costs have fallen to a point where they are affordable. There is no reason for your managers and salespeople not to have email and calendar access wherever they go – this is a big potential money-saver since your employees can all use your time more efficiently.

They don’t need to come to the office to check email between appointments, for example. Receiving an email in a timely manner while you’re away from the office could sometimes spell the difference between closing a deal or not. It’s the sort of technology that is ideal for an SME – cheap and practical.

The world of technology is constantly changing and evolving, but the basic business principles remain the same. Choose technologies that are simple, affordable and have provable business benefits and you’ll reap a real return on investment from them without breaking the bank.

By Anton Herbst, managing director of A.C.T.

With last month’s installment of this column explaining what it takes to build an effective customer value proposition, we’re moving onto building a successful profit model and the steps towards thoroughly understanding the interplay between revenues, costs, profit margin and resource velocity.

Tackling and understanding each of these areas is relatively simple – figuring out how they impact different aspects of your business is far more difficult though.

To recap, revenue is quite simply your company’s income, i.e. the volume of stock you are selling multiplied by the price you’re selling that stock at.

Cost is the sum of all expenses your company incurs in order to sell its stock to customers.

Profit is the differential between these two – and profit margin is the percentage differential between revenues and costs.

Resource velocity – the most confusing term of the four – is how  fast we need to turn over inventory, fixed assets, debtors and other assets – and overall, how well we need to utilise resources – to support our expected volume and achieve our anticipated profits

Sounds simple? Well, it’s a little more complex considering the economic downturn or recession we find ourselves in.

The Rand’s strengthening has been a challenge, since it’s meant that the price we are able to command for our products has slipped. At the same time, the natural slowdown in the market means demand for our products is tailing off.

Consequently, costs are coming under enormous pressure.

The only way to make healthy profits in this economy is to either increase margins or increase our resource velocity.

Increasing margins is counterintuitive in market conditions such as these – the tendency is towards selling higher volumes and this often calls for margins to be cut.

So, with margins under pressure, companies need to increase the velocity of resources. In a nutshell, companies’ cash to cash cycle has to speed up.

Building a sound profit model therefore revolves directly around finding the sweet spot between the profit margin your business is achieving and its ability to speed up its cash to cash cycle.

It is important to focus on both of these areas, since a company charging 10% profit margin on its stock, with a resource velocity that sees it turning cash into stock and back into cash again six times a year, makes the same return as a company with half the profit margin (5%), but the ability to turn cash into stock and back into cash again 12 times a year.

Personally, with the market as tight as what it is, I believe the key lies in maintaining margins at a reasonable limit and exercising excellent financial discipline.

There’s quite frankly far less room to move today when it comes to margins, after all, you need to remain competitive. There is however a ton more a company can do when it comes to managing its cash flow (cash to cash cycle) more effectively.

It’s no easy task, but after all we’re in a downturn – hard work is called for. I can personally testify to the fact that it can be achieved.

It can be done, but it takes focus, discipline and bravery. Good Luck.

By Anton Herbst, managing director of A.C.T.

Four months ago we embarked on a journey toward understanding the power of sound business models and how they can get you through the downturn.

And looking back on what’s taken place with the business and economic climates in South Africa over the past eight or so weeks, it’s clear this discussion point couldn’t have been timed better.

With the way things look in the market I believe the timing is right for us to take our business models up a level and not just be concerned with our own businesses. After all, the business models of our suppliers, peers and customers are vital influencers and contributors to our own success levels.

For this to take place, the business models of all concerned must align. It’s a case of asking oneself ‘what I do that makes your business better’ and vice versa.

It’s not just about what value your suppliers and partners’ hold for you, but how they improve the value proposition to the customer by working through you.

It’s an interesting way to begin thinking, because no matter how integrated we make our own businesses, in the greater scheme of things they are nothing more than silos connected together via a supply chain.

And since we’re all aware of how businesses cannot function effectively if they operate with various silos within their own business model, it’s not difficult to imagine what the potential of the end-to-end channel would be, if each player became more integrated with the next.

Since businesses are generally reticent to share their inner workings with peers and partners (everyone, after all claims to have a trade secret or a unique value proposition), the traditional communications models need tweaking.

We’re realizing that the styles of communication employed in the past aren’t speedy enough to cope with the complexity of a supply chain with merged business models.

Social media is becoming the enabler to the communications that take place across the supply chain, since the volume of information players in the supply chain need to communicate and the speed at which that needs to take place calls for a medium that’s instantaneous and capable of encouraging collaboration by its very nature.

If we get this right, we’ll find we are able to offer far more value to our customers than ever before, and that we are able to do so at a fraction of the cost.

But getting there is going to take trust – taking the first step towards trusting all of the members of the supply chain and sharing information freely is a bold one.

Despite this obstacle, I believe a more collaborative supply chain environment can work – and furthermore that it must work if we are to survive the rest of this economic crisis and whatever the future holds.

We must however clearly define the rules of engagement and ensure everyone involved is in it for the long haul.

This kind of thinking entails breaking new ground – companies can either evolve and become a part of it, or fall behind and become extinct, just like the Dinosaurs.

South Africa’s largest black empowered IT distribution group, MB Technologies, has announced the appointment of Pierre Spies and Anton Herbst as executive directors to the main board.

Glenn Fullerton, CEO of MBT says “both Pierre and Anton, CEO’s of Tarsus Technologies and ACT respectively, are veterans of the South African IT Industry. They have made significant contributions to the growth of the group over many years. Their insight into various sectors of the IT industry in which they have operated will further strengthen the MB Technologies main board. Their wealth of knowledge and experience will be well utilised to ensure optimisation of Group and operational strategies and will assist the Group in its future growth plans.”

He adds: “Their appointments will not alter their day to day executive responsibilities for the running of their respective operations. They will continue to hold and fulfil their current positions as chief executive officers.”

“The combination of their operational insights into dynamic market conditions in the IT distribution market coupled with their abilities to distil their more than three decades worth of collective experience into a broader, strategic view of the market will be vital contributors to the success of the Group,” says MB Technologies Chairman, Leo Baxter.

Fullerton concludes “We are delighted to appoint such outstanding and loyal members of the MB Technologies team to the main board”.