Will Your New Software Save Your Business Money?

Will Your New Software Save Your Business Money?

3 min read
Larry Alton

Larry is an independent, full-time writer and consultant. His writing covers a broad range of topics including business, investment, and technology.

Experience
Larry started his career with Demand Media. There he contributed to and edited nearly every type of business-related content from real estate investing to software and digital media.
Since then, Larry has worked as an independent, full-time writer and consultant. His writing covers a broad range of topics including business, investment and technology. His contributions include top-tier publications like Entrepreneur Media, TechCrunch, and Inc.com.

When he is not writing, Larry assists both entrepreneurs and mid-market businesses in optimizing strategies for growth, cost cutting, and operational optimization.

As an avid real estate investor, Larry cut his teeth in the early 2000s buying land and small single family properties. He has since acquired and flipped over 30 parcels and small homes across the United States. While Larry’s real estate investing experience is a side passion, he will affirm his experience and know-how in real estate investing is derived more from his failures than his successes.

Education
Larry graduated in the top 2% from Iowa State University’s Ivy School of Business Management.

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Software is one of the most important investments your company will make. Not only will it affect how your employees are able to work, but it can also affect how your business is organized and how you appear to your customers. Some companies choose to upgrade their software or buy new software for the sole (or primary) intention of saving money.

The Problem With Saving Money on Software

Unfortunately, this approach doesn’t always work for one or more of a variety of reasons. For example:

  • The software is not as robust as advertised. You may realize after you make an upgrade that a piece of software doesn’t perform as efficiently or as appropriately as you were hoping.
  • You upgraded something that didn’t require upgrading. You might upgrade something that works perfectly well as-is or solve a “problem” that didn’t exist.
  • You overpaid. You could get substantial new features, but overpay for them, limiting your profitability overall.
  • You neglected certain variables. You may neglect to consider certain variables that could influence the value of your decision.

So, how can you tell if a new software option has the potential to save your business money? Rather than assuming that your new software will save you more than it costs, focus on how the software will operate in one (or more) of three key money-saving dimensions: automation, efficiency, and profitability.

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Automation

One of the easiest ways to save money with software is to use it to automate something that was once done by a human employee. This dimension makes it somewhat easy to calculate whether you’ll save money by making the investment; all you’ll need to do is calculate the salary or man hours you’ll save by automating a certain line of tasks and compare that to how much you’ll pay for the software. In nearly all cases, the software will be a less expensive option.

Take, for example, an auto attendant, which fields and directs incoming phone calls; depending on the size of your organization, you could easily use it to fill one or two human positions that already exist.

Efficiency

Next, you could choose a software option that improves employee efficiency in some way. Rather than replacing a human task with a task that can be done with a machine, this strategy allows your human employees to get more work done in less time (or in a more organized way).

Unfortunately, the exact effectiveness of your software is difficult to measure here; you’ll need to track employee time for different tasks, ensure that your employees are using your software carefully, and apply those numbers to the whole organization to see if it makes sense. You’ll also need to measure how long it takes new users to learn the new platform, and account for secondary variables, like morale and individual capabilities.

Profitability

You could also save money for your business by investing in software that improves your company’s profitability in some way. For example, you could use software that attracts more traffic to your site, which in turn increases your total number of conversions, and therefore allows you to collect more revenue.

Here, you’ll also run into measurement difficulties; most software that operates in this area works together with your other strategies to produce a singular total result. For example, if you use email campaign management software to send out more email blasts to your core customers, how can you tell for sure that your increased number of subscribers is due to your software investment directly and isn’t, say, the result of increased experience leading you to write more persuasive subject lines? There’s no easy answer here, making profitability one of the hardest dimensions to prove.

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General Tips

In addition to making calculations in these three dimensions, you can increase your odds of success with the following tips:

  • Do your research ahead of time. Investigate as many options as you can, and compare them in detail. Don’t trust your instincts; run the numbers, and see if they make sense.
  • Don’t mistake “better” for “best. After making an improvement, you may think your work is done, but chances are, sooner or later, there will be another option that can save you even more money.
  • Remember subjective measurements. Calculating monetary costs and measuring time spent is important, but the sentiments of your team also matter. Software could affect morale as well.
  • Stick to a plan. Constantly changing software is going to be a logistical nightmare for both you and your team. Try to remain as consistent as possible, and do new rollouts gradually.

Investing in new, better software is almost always a cost-effective move—but only when you know what you’re doing. Focus on upgrading the right types of software, know the numbers in advance, and you should have no trouble maximizing your profitability.

What software upgrades having you made lately (or what are you considering)?

Let’s chat below!