Want to invest in technology? Ask these…

Questions startups should ask before investing in technology...

B. F. Skinner in ‘Contingencies of Reinforcement’ wrote - ‘The real problem is not whether machines think but whether men do.’ This is precisely the debate in question when it comes to startups using and investing in technology. Technology is no doubt crucial and important in today’s fast paced world. But is it correct for startups to blindly invest in expensive technology? Shouldn’t the budget be considered before investing in technology? Are startups really considering business goals while spending on technology, or are they simply jumping on the bandwagon?

In almost all cases, startups run on tight finances and cannot use expensive resources. At the same time, adopting technology could help small businesses to a large extent if used wisely. The critical factor is to draw a line between what is necessary and what is not.

Startups should ask the right questions before investing in technology and this could help in striking a fine balance. Here are some such questions. The answers need not be an emphatic ‘Yes’ to all the questions below. Nevertheless, it is vital to look at all the angles, understand the importance in the context of your startup’s unique needs and then make your decision of whether or not you should invest in the technology.

Is the new technology helping my business?

If there is a problem at hand like poor communication or increased costs or if you want to improve sales or increase profits, the technology you wish to adapt should help in achieving this purpose. You may decide to use certain customer relationship tools to enhance product visibility among your target audience. But is this technology helping or reducing the efficiency of your employees? Are your customers really finding this useful or do they prefer your previous modes of engagement? What about your suppliers and other stakeholders? It is essential that you consider different aspects, rather than only look at the financial side of your business.

Is the investment affordable?

If you are convinced that investing in the technology will help in addressing a business concern or help in improving performance, you must next ask yourself if the investment is really affordable for your business. A good way to answer this question would be to weigh the benefits from this investment vis-à-vis the cost of this investment.

What are the recurring costs for using this technology?

Most startups stop with calculating the initial costs of the investment. But technology is expensive not just due to the initial cost, but also for the recurring expenses one has to incur. Purchase of licenses, training of staff for using the technology, maintenance expenses and expenses incurred for troubleshooting could all work out to be quite substantial on an annual basis. Compare these recurring annual expenses with the amount you could earn more or save because of this technology.

Are my goals being addressed?

The cost-benefit analysis should be done over the long term as well. You may want to expand to different product lines and different geographies over the long term. Will the new technology help in achieving this or will it be a hindrance? Is it necessary to invest for the future, today? May be, maybe not.

Have I done my research?

If you think investing in a particular technology makes financial and business sense, then you must finally ask yourself if you know the options in the market for this technology. For example, if you decide to adopt an ERP solution for your start-up, it is important to know the various products available in your budget. The offerings from different players should be researched and analyzed before making the final choice.

Technology is King in today’s market place and business environment. However, it should be remembered that the key to benefiting from the use of technology is investing in the ‘right technology’ at the ‘right time’ and the ‘right cost’ and not simply investing in ‘any technology’.

What questions have you asked before investing into startups? Please share your views.