In my last column on The Young Entrepreneur, I urged those of you with great ideas to adopt some habits that will further your enterprise.  I have gotten some good feedback on that article.  A couple of people asked if only Young Entrepreneurs were targeted in that post.  Certainly not.  I have been advising both young (twenty-somethings) and more traveled (forty and fifty-somethings) for some time now and the habits that I talked about were beneficial for all of us, even, gasp, those folks who are happily ensconced in Corporate America.

Today, I want to talk about tools.  I review a lot of business plans and one thing that entrepreneurs tend to do is overspend on tools.  Specifically computer tools.  There can also be a tendency to not look at IT management things like computer security and backup strategies.  In some cases, legalities are involved.  Let’s take a look at some specific areas.

Understand Your Needs

The first thing that you should do is clarify exactly what your business does.  Of course, you know what that is.  But really what technology is critical to your success?  For example, a printing business probably needs to purchase licenses to Photoshop.  An accounting firm probably needs the most fully laden copy of Quickbooks. For these products, bite the bullet and buy the correct number of licenses.  You don’t need the Business Software Alliance on your case (although my take their methods of enforcement should make another post).  You will get support and know that you will be able to perform your role with your clients.

If these products are critical, look to potentially become a development partner with the software company.  You may be able to get some very nice perks for joining as a partner, although it might stifle some of your creativity.  Your mileage will vary.

If your company needs to utilize software to build your product or service, be sure to get qualified legal advice before choosing a platform to build upon.  There are a lot of open-source products out there and as many different licensing agreements.  If you choose products with the wrong open-source licenses, you may lose out on patent protection or have other intellectual property issues.  This is an area that you need to spend the money to ensure that you are protected.  When you go out for financing, intellectual property rights can be critical to the investment decision.

Software

For all extraneous (non-critical) software, look for free alternatives.  Do you really need to use Microsoft Office?  At $250 a pop, this is a serious question.  Sure, you could buy the Student and Teacher Edition, but remember the BSA…  There are a lot of other alternatives.  If you decide that your documents and spreadsheets should be kept locally, Open Office is a fine substitute.  There is a no charge license, it will read and write Microsoft standard documents and it offers most of the functionality of the name brand.

I would think seriously about alternatives on the web.  In this case, you may lose some functionality (much of which few people utilize), but have the advantage of easily sharing documents and collaboratively editing them.  Two good free examples are Google Docs and Zoho Office. Google docs allows you to create (and import/export Microsoft formatted) documents, spreadsheets and presentations. Multiple people can edit the document concurrently.  The spreadsheet has functionality that allows you to present a form for data entry and distribute it to others to allow them to build a spreadsheet — good for things like party invites or benefits signups. Zoho Office has many modules, including standards such as spreadsheets, documents and databases and stretching to Customer Relationship Managment (CRM) and Human Resources Management.  The CRM solution is free for up to 3 users and rivals SalesForce.com for the functionality for the small business marketplace.

The benefit of web based alternatives go beyond the free price and collaboration.  You will have the confidence that the files are backed up and available securely, anywhere there is a browser.  If needed, you could update that contract from an Internet Cafe in Kauai.  If you need help with this, please call me, I would love to help.

For managing your finances, lots of times people will start out with Microsoft Excel or another spreadsheet based product.  I would recommend starting out with the smallest version of QuickBooks that you can.  I have had experience with a number of other products.  They all work fine, but QuickBooks is the standard and your accountant will be sure to be able to take downloads of your files and work on them.  I have tried the QuickBooks online version and was very impressed with it.  If you have less than 20 customers, the service is free.  More fully functional versions are available.  The one including time and expense tracking for services firms is priced at $34.95 per month and can be well worth it for a company with a significant billable work force.

For other tasks, there are open-source or free products that work as well as the boxed software you can get at Fry’s or TigerDirect.

• Diagramming software: Instead of Visio (MSRP $269) check out Dia or online using LovelyCharts
• Graphical software: Instead of Photoshop (MSRP $999) check out GIMP
• Programming Language: Instead of Microsoft Visual Studio (MSRP $799) check out Ruby On Rails or Java
• Operating systems: Instead of Microsoft Vista (MSRP $270) check out Linux

Do you have others that you use and can recommend?  Let me know in the comments.

Online Identity

For your online identity, you will need to buy a domain.  Look out for deals from GoDaddy and 1&1 and Dreamhost, all of whom also offer low cost hosting.  If your product or service will require lots of access or usage will grow significantly over time, look for the ability to buy additional space or bandwidth, as needed. Potentially, you might want to look into dedicated server and facilities for managing multiple servers.  Day one, try to find a vendor that you can grow with. And check out the service level agreements.  These documents explain what the hosting company will agree to provide to you in terms of uptime and security.  Comparing pricing and service level agreements will lead you to the right value proposition for you.

Google Apps for Business can be a great way to keep everyone in the company on a single platform that will allow for web access to authorized users from anywhere.  This service will encompass email, calendaring, intranet, search, documents and spreadsheets and other Google based services.  You will get to use your domain, such as www.yourbusiness.com, to allow you to utilize your corporate identity. Google updates their products regularly and will take care of backing up and managing your servers.

Another solution for web developers is Amazon S3 (Simple Storage Service). Amazon provides as much storage for objects as you need and charges you for just what you utilize.

IT Management

IT Management is a key topic, even (or especially) in small companies.  You need to have a planned backup strategy.  It could be just copying your working files daily to a USB drive and keeping it at an alternative location.  It could be to use a service like Mozy or Carbonite.  Of course, the use of web based software could obviate the need for significant local backup capability.

In any case, make sure that you try out your data recovery.  If you needed to recover a file that was deleted, could you do it easily?  What would happen if your desktop computer broke on a Wednesday afternoon?  How would you recover so that you could still conduct business?  What if the problem was more widespread than just your desktop, say a natural disaster?  Could you still run your business?  All of these are key concerns and deserve a solid plan to support your business.

Security is also a concern.  Be sure to develop your applications and access to your systems with strong security.  If your business has to take broader precautions, for example if it takes credit cards or is obligated to follow the HIPAA laws, you will need to invest in stricter security systems.  Work with a security expert to protect your systems and data.  A lawsuit for a breach of security in any business is bad news.

Be sure to look at the costs of telecom systems.  The costs for VOIP (voice over internet protocol) service have decreased and the features of phone systems to integrate with your office systems have increased.  Get a free conference call number at The Basement Ventures. There is even an open source package for telephone management – Asterisk, where you can set up your own telephone system for your office, just like the big guys.

There are a lot of alternatives out there for reducing the costs and increasing the capabilities of your data tools.  If you have questions or other products that work well for you, please let me know in the comments.