A Penny Saved is a Penny Earned

The biggest weapon in the small publisher’s arsenal is flexibility. A small publisher has the flexibility to adapt more quickly to changing business environments, and to find clever economical ways to get things done. In short, you can take risks.

There is this discussion going on in the forums right now about how much money you need to start an ecommerce site. I’m of the opinion that you need very little, and I have the experience to back that up. In fact in a few weeks I’m going to post a rather detailed blog post about starting an ecommerce site without spending big bucks.

However, in truth, this discussion is more about managing expenses and taking risks. A large company, with a much larger bank balance than you, can ironically not afford to take risks. When you’re not the business owner, when you’re merely a manager or running it at the behest of a board or shareholders you have to be seem to be, above all else, responsible. If your business needs a website you don’t hire the cheap labor, you hire the professional, accountable labor. Some company, who hopefully has errors and omissions insurance, who you can point the finger at if something goes wrong. That way, if something does go wrong, you can go to your boss with a clear conscious and say you hired the most reliable people you could find.

In contrast the small business owner doesn’t have to report to anyone, and he can afford to take a risk. So instead of spending $20,000 on an ecommerce system, he can go use Oscommerce, hire someone to customize it, and get a fully functional ecommerce site for less than $1000. He’s not hiring a large insured consulting company, but then again he just put $19,000 in his pocket and doesn’t really mind.

As far quality goes, I’m sure people will claim that by spending more you get higher quality. I find that grossly arrogant. Most of the cheap labor comes from students, or people from India, China, Eastern Europe, etc. These people are not dumber or less talented than US, UK, Canadian, or Australian companies. They just have a lower cost of living. In fact, quality designs that rival or beat those produced by large companies are often produced by designers such as those I mentioned for a few hundred dollars. Just look at the SitePoint Contest Forum.

Of course, the biggest reason for keeping expenses down is to increase profitability. If you only spent $500 to make your ecommerce site, and you make a profit of $50 per sale, then 10 sales later you’re in the black and the site is profitable.

This also goes for content sites. If you keep your expenses low, by working from home and looking for cheap hosting deals, or cheap software, or cheap labor, then your profits will increase. My content sites have always been profitable, and it is because my expenses have always been low. Back when large content publishing companies were losing money or going under left and right (bubble days) I was profitable. Why? Because I didn’t have a lease on office space, I did not have dozens of employees, with benefits and stock options. I did not indulge in fancy office furniture and computers. I did not splurge on trips to Las Vegas to go to some conference.

By being independent you can keep expenses low, and remember, a penny saved is a penny earned. When you’re the business owner every dime you save goes to your pocket.

When you first become successful it may be tempting to go on a buying spree. I think that some people use how much they spend as a way to validate their success, along the lines of “Because I can afford X, I must be a real businessman now”. This is a bad attitude to have and it is not conducive to continued business success. If someone tells me they spent $10,000 to have an ecommerce site developed, I’m not impressed, I laugh, because I know I can get an equivalent site for 5-10% of that.

The point of all this being, don’t measure your success by the size of your expenses, look at your profits instead. Don’t celebrate indulgence, celebrate frugality. In today’s material driven society the guy in the big house with the nice car isn’t always the most successful guy, sometimes he is just the guy with the most debt and the smallest savings. So remember, when you’re a business owner, every dollar you save goes into your pocket. Don’t go on a spending spree when because “it’s the business’ money” and “it’s tax deductible.” It’s your money, and it is the dollars you save that make you wealthier, not the dollars you spend.

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  • BillyG

    funny, my Bloglines feed says the author was Aspen, here it says Chris, either way, nice article

    One I would like to add that I say all the time:

    It’s not how much you make, it’s how much you have after all the bills.

  • Alex_

    very nice article

  • shadowbox

    Yes, being careful with your budget is good advice, but I would say that it’s not what you spend, it’s how you spend it. My advice to any small businessman who is thinking about setting up an ecommerce site is, as Chris says, be flexible – that is, be prepared to understand your own limitations and realise that your business may benefit greatly from bringing in an expert in ecommerce consulting.

    As pointed out in the thread Chris refers to, I’m not talking about a plain old ‘web designer’, I’m talking about a true expert in ecommerce, someone who understands about improving conversion rates, knows about writing good web copy, knows which words persuade visitors to take action, etc etc.

    Thinking of using OSCommerce? Well, make an informed decision. Are you able to fix problems/bugs that may arise yourself? Are you sure you want to run your business on a piece of software that has no official support with guaranteed turnaround time? Or would you rather pay to have instant telephone assistance from the software manufacturer to ensure any bug-related downtime is kept to a minimum? Save your self £500 in set up fees by going open source, or possibly lose £10000s when your site goes down for a couple of weeks while you wait for someone on a forum to suggest a fix?

    Does your oscommerce template designer know the first thing about running an ecommerce site, or does he just know how to mess about with the template colours and layout in DW? Is there any reasoning to his design, has it been created to encourage deeper navigation into the site, or did he just do it that way because it ‘looked cool’?

    I could go on, but you get the picture. Skrimp and save, but don’t cut off your nose to spite your face. I’m not saying don’t try to keep costs down, just make sure your keeping them down in the right areas and spending intelligently in others.

  • http://www.eleytech.com beley

    Good points, indeed. I think most people here would agree with you Chris. You can go to students and outsource to offshore developers because you have an in-depth knowledge of this industry. You know how to inverview and hire talented developers. You know what to look for, and what to look out for.

    Most people just don’t. For the John Does out there, there are professionals who, yes, charge a lot more. They can’t just skimp and hire some kid because they’d have absolutely no clue what kid to hire. They go by proven track records and solid referrals.

    You, and I, may be able to piece together a successful e-commerce business for a few hundred (maybe thousand) bucks. However, we also have a better understanding of conversions, copy, SEO, etc. WE can do a lot of the work ourselves.

    The difference is that most companies and individuals who need an e-commerce site don’t know anything about the web or e-commerce They’re relying on the design/development company for everything from copy to software to marketing.

    While this “skimp and save” approach might work for SitePoint’s core audience (well, I don’t even think it would for the majority of them) it would never work with the decision makers in companies and corporations with no knowledge of web development at all.

    For them, it’s worth the money to hire a reputable firm and get it done right the first time rather than just trying to wing it.

  • http://www.revmedia.com dhecker

    I agree. This is great advice, but fit for web developers only. Client’s that I’ve helped setup an e-commerce site don’t know their ssl from their OSC, and they don’t really want to learn. They have back-end fulfillment systems and accounting systems to integrate with, and they are in a hurry to start applying their marketing plans to the site. They don’t care much if it could have been done cheaper, they just know that it fit their budget. I usually price e-commerce sites around 40k, and there a plenty of happy clients. If I needed one for myself, I could have it done for $1000.

    I’ve done online stores in the 10k range, the 40k range, the 300k range, and the million+ range. Each of those clients had a totally different scenario, and the prices were right for them.

  • arthuc01

    I agree this is very good advice and there is a very strong business case for going for a ‘free’ open source alternatives to expensive E-commerce software or CMSs’

  • mhdoc

    The opportunity this situation presents is the newcomer who is willing to study and learn can build a profitable site with no debt, no venture capital, and no loans. The barrier to entry is education and drive, not capital. That removes a huge amount of risk.

  • whatever4

    Happened to stumble across this site. We began our business 3.5 years ago with $100 in our checking account, borrowed $3,000 to hire a college student to hack apart oscommerce to fit our needs and received no income for 1.5 years.

    My partner (sister) would laugh at me because I spent so much time surfing the web for information regarding ecommerce, site promotion, marketing, etc…she was certain I was goofing around.

    We certainly made our mistakes, as our business grew we thought, “Oh, we can double our business with advertising.” In one year between Overture and Google we spent $40,000 with no significant increase in sales-however Google did send us a very nice beach towel. When I looked at that number I felt sick..and returned to the method that had been working for us which included no advertising.

    Now with a $0 advertising budget for the last year we receive between 2,500-3,000/visitors a day and expect to do over a million this year-putting much more into our pocket.

    Do we still have a long way to go..yes, but we are getting there. I believe the average person can be successful without spending a fortune but they have to be willing to put in the time and effort and I think a lot of people are lazy.

  • http://www.frixer.com petertdavis

    You make a good point Chris, too bad you suggest bloatware as a better alternative though. Surely there’s better software than oscommerce out there to use.

  • http://www.redflystudios.com Cianuro

    Great article and yet again another boost to us small business owners confidence.Thanks Chris.

  • make money online

    Great article, that was interesting

  • Roman

    Interesting. In my case, I have decided to use a Windows alternative to osCommerce, named Comersus, for me it easier to modify since it use ASP instead of PHP (language of osCommerce)

    I think that an open source cart is best for anyone, even if you are not a tech guy, you can always hire a programmer in rentacoder.com to fix or customize the application.