FOCUS ON THE FACTS
Buying a Computer For a Small Business

SBA -U.S. Small Business Administration in cooperation with Microsoft Corporation

Successful small business expansions and new formations lead the way in creating new markets, innovations, and jobs that fuel economic growth and prosperity.

In recognition of the importance of small business to a strong economy, Microsoft Corporation has joined with the U.S. Small Business Administration (SBA) to help meet the information needs of existing business owners and aspiring entrepreneurs.

We hope Focus on the Facts meets your needs, and we invite your comments and questions. Your success in business depends on what you know and how well you can apply what you have learned.

Do I need to computerize?

The decision to buy a computer system for your small business can be a costly one, in both time and money. Be sure you are ready to invest in making computerization work for you. There are two major reasons to computerize a small business: to increase your profit and to increase your productivity. The kinds of benefits that may result from computerizing include:

  • No more bottlenecks in the flow of information or products
  • On-the-spot information on which to base decisions
  • Increased sales and new opportunities that come with being well-organized
  • More current accounts receivable and, as a result, reduced cash-flow problems
  • Reduced overtime and higher productivity for yourself and your employees

What tasks will I computerize?

The prime candidates for computerization are labor-intensive tasks. Payroll, order tracking, monthly invoicing, cashflow analysis, account tracking, proposal writing, form letters, and mailing lists are some examples of labor-intensive tasks.

First make a list of all the tasks you need to do in your office. You might find it helpful to design a form on which to put information about each task:

What information does the task require? Financial data? Charts? Drawings? Customer information?

  • What results from the task? A business plan? A report? Mailing labels? A client newsletter?
  • How often is the information needed? Daily? Weekly? Monthly? Yearly?
  • Who uses the information? You? Your accountant? Your clients?
  • What process is currently used to produce the information? Do you or an employee produce it manually? Do you contract it out?

Will computerization save me time or money?

Analyze each of the tasks you put on your list to determine how computerizing them might save you time or money:

  • How much does it cost to do the task manually? For example, how much time and salary does it cost you to type five identical contracts for five different clients?
  • How much time and salary would it cost you if the contract were typed once on a computer and then printed out in five individualized copies?
  • Is your current process an efficient one? There is no point in speeding up a bad system.
  • Do you need to do lots of calculations? Is most of your work typing tasks? Do you have many records to keep track of? Or does your business require all of these?
  • Are there things you are not doing now that you would like to do? How about a daily cash-flow report? Weekly inventory status? Direct mall to preferred customers?

What software do I need?

When choosing a computer, you will need to select the right software. Software is what gives your computer instructions and tells it how to do your tasks.

There are five primary types of business software, often called applications:

An electronic spreadsheet does calculations such as budgets, business plans, amortization, cash-flow analysis, statistical analysis, what-if analysis, and other mathematical functions.

A word processor creates and stores documents such as letters, reports, catalogs, mailing labels, and procedure manuals. With many word processors, you can put charts from a
spreadsheet or drawings from a graphics application into your documents.

A database stores information about customers, vendors, investors, or inventory and then organizes, sorts, and updates the information so that you can create reports, catalogs,
invoices, monthly statements, or form letters.

A desktop publisher gives you tools to produce sophisticated layouts for newsletters, catalogs, business plans, and other documents. With communications you can connect your computer to a modem and call other computers to send or receive information. This might include getting market demographics from an online database service, filing taxes, or sending financial information to your accountant.

Integrated software includes several tools-spreadsheet, word processor, database, and often communications-that work together to help you do all your basic business tasks.

How do I choose the right application?

Before shopping for applications, create a table that lists your required tasks in one column and each software package you want to look at in another column. Compare the packages to find out which one does the best job for you.

Create a sample document or representative worksheet of the task(s) you want to do with the computer, and take this with you when you shop. Ask the salesperson to demonstrate the software and show you how to use it to do your work. Then try the software yourself: learn enough to type a letter or create a spreadsheet. This can help you decide which software will work for you and your business.

What kind of applications you buy depends on three main factors:

  • The tools you need to automate the tasks in your business.
  • The cost to purchase and install: when does this software begin to pay for itself?
  • The cost of and method for training yourself or employees, fixing any problems, and keeping the system running.
  • There are two ways to buy software: off-the-shelf or custom-made.

Off-the-shelf software can be purchased at a computer store, a software store, or through a mail-order catalog. The cost can be approximately $50 to $500 per package. You can also purchase additional tools, such as financial models, to adapt off-the-shelf software to your needs.

Custom-made software is written for you by a consultant, who also provides the training and manuals for the system. Such a system will be more expensive than off-the-shelf software.

Shopping for the computer hardware

What software you buy determines how much operating memory (RAM) you will need, how much storage space you will need for your data (disk memory), how fast the computer needs to be, and how many people can work with it at the same time. Once you have selected a software package that fits your needs, you need to find hardware to run it on. You can buy a desktop computer that stays in the office or a laptop computer that travels with you.

What hardware do I need?

There are several components to a computer, all of which combine to give you a system that meets your needs.

  • Microprocessor-The electronic heart of the computer. It performs all the operations of the computer. The speed (megahertz-Mhz) at which a computer processes information is determined by its microprocessor.
  • Memory-How much information (kilobytes-K) the computer can process during a work session. Called Random Access Memory, or RAM.
  • Disk space-The amount of information (kilobytes-K or megabytes-MB) you can store on a disk. Disks are either enclosed in your computer (a hard disk) or put into the computer each time you need the information (a floppy disk).
  • Monitor-The screen on which you see the information in your computer's memory (RAM). The most important consideration is the screen's readability can you see what you need to see without eyestrain?
  • Printer- Laser printers provide high-quality output that resembles typed or typeset text.

Good luck!

Source: SBA—The SBA's participation in this publication does not constitute an overt or implied endorsement of the co-sponsoring company's product or service.

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