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A Better Way to Pay for IT Investments

By Barry Moltz, author of "How to Get Unstuck: 25 Ways to Get Your Business Growing Again"

When I ran my last mail-order technical software company, we needed a much larger order processing system to accommodate our growth. The heart-stopping upfront investment was $100,000 in hardware, a dedicated IT person, and six months of migration. In the end, there was no guarantee, after spending this time and money, that it would be more effective for my company.

Fast-forward to 2015, when the cloud has changed everything. Software as a Service (SaaS) is an especially vital component for success at small businesses because it allows business owners to match monthly expenses to revenue. Where many businesses get in trouble is that their upfront capital investments and fixed expenses are too high for their current level of revenue. While their sales fluctuate monthly, their costs remain at the same high level, which causes company losses. In my last business, I had to make the technology investment, regardless of what our sales were actually going to be in the next month. These types of "big bets" can be disastrous for a small company.


Paying for the applications this way can also lower a company's taxes because it becomes an operational expense rather than one amortized over time.

Fortunately, SaaS now allows small business owners to vary their expenses by paying for only what they need and use. The investment only goes up as more people use the applications. Typically there are no long-term contracts or large investments up front. SaaS no longer requires dedicated IT resources, which most small businesses do not have or can't afford. Keeping up with the latest version of the software happens through automatic updates and is mostly transparent to users. Paying for the applications this way can also lower a company's taxes because it becomes an operational expense rather than one amortized over time.

Most important, SaaS works like people do at small businesses. Traditional software used to be licensed to single devices. SaaS allows the user to work on any device anywhere. For example, I can not only use Microsoft Office 365 and all my own data on the desktop in my office, but also on my laptop, tablet, and smartphone.

The emergence of the cloud has been like a winning lottery ticket for every small business owner. They now have access to the tools they need to compete against larger companies. Not only can every small business take advantage of the most advanced applications on the market, but it can financially match expenses to revenue to increase its chances of success.

Barry Moltz helps small businesses get unstuck. He can be found at www.barrymoltz.com.

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