Category Archive:
Posted by Commie B on July 14, 2011 at 10:42 pm
I’m personally not a big fan of PPC advertising online, unless you can really hone in on your audience. Facebook and LinkedIn provide you this, but the statistics leave much to be desired. With time, though, one of the big things with advertising businesses like Google Adwords, AdBrite and others is behaviour based advertising.
Whilst is may sound like behaviour based advertising is a great idea – well, it’s really a blackhole that will suck your advertising budget why. But first, for those who don’t know, let me explain what this is.
Behaviour (or behavior in the US) Based Advertising
So you’re browsing the internet and you come across something you like, or click on a certain link or ad and land on a website which may be of interest to you. A cookie gets generated and stored on your machine. Now, until you clear your browser history and delete this business or company knows you visited their site, and each time you land on a site that uses a network that these guys advertise with, you’ll see their ad – over and over again. Confused. Here’s a scenario:
You visit website X to see a product. You don’t buy it and you leave the site. Then you come land on Asifism.com, which has Google Adwords ads on it. If website X advertises with Google Adwords, you’ll see a website X ad on Asifism.com any other website that uses Google Adwords until you clear your cookies.
So, what’s the problem? Well, this may be great because marketing experts (also known as morons, sometimes) claim that it takes 3-5 times for someone to see your ad or message before they will act on it. It’s a bit like suggesting an idea to a visitor again an again until it becomes acceptable. So, if you sell a web app that may have been of interest to someone, and you float your ad to them long enough, they may just come and sign up. And this is where the problem begins.
The Problem
I’ve recently been trying out a bunch of CRM applications. I personally think MS Dynamics CRM is great, but it’s quite comprehensive and a tad bit costly, especially if you start piling up some users. So, I researched a whole bunch of these CRMs at work and decided I’ll sign up for a couple of them. But I didn’t sign up on the same machine I browsed the websites with. I signed up using another PC. Now I spend 8 hours a day doing various things on the internet and keep seeing ads for a CRM application for which I’m running on a free trial. I conveniently click on the add and end up on their website. If, after 15 days, I decide I don’t want to use their service, they’ve probably paid at least $2-3 each time I clicked on the add and got zero business out of it.
So why do businesses do it?
Probably because they don’t realise that this really is not that brilliant a marketing tactic.
I’ve received repeated mail and invites from marketing experts who’re going train you on how to use this to your benefit – don’t buy their baloney. Ultimately, as the advertiser, you can’t do much to stop me from seeing your ad once the ad network picks up that cookie and starts displaying your ad. In fact, if I am a competitor and know that you are using behaviour based advertising, well, I can run out your PPC daily allowance rather quickly.
Advertising on Facebook, for instance, is just as risky. The same person can see your ad 10 times and come visit your site 10 times and not sign up. Or, they could keep clicking on the ad and coming to your site to log-in to their account. Until these kind of, well, holes in the system can be addressed, I recommend staying away from behaviour based advertising.
Besides, PPC is not for everyone. More businesses now probably shutdown because of how much money they spend on Google Adwords than make a killing. It’s not 2001 anymore!
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Posted by Commie B on April 9, 2011 at 12:09 pm
I’ve been a great PayPal customer for over 7 years. With multiple paid accounts and thousands of dollars in activity every year, I have finally made the conscious decision to no more use PayPal as our primary credit card processing system. It took getting bitten by the snake for me, but we had already been warned.
The internet has many websites dedicated to why you shouldn’t use PayPal, yet the millions of users who use PayPal are proof of the fact that PayPal is, in fact, not all a scam. It was a useful product, and it is for many people looking to accept credit cards without going through too much legal or banking hassle (which differs from country to country and it really is painful in some countries).
But when you start making larger transactions and you have no one speak to over the phone who can make decisions or tell you what happened or why something didn’t happen, it is bad – really, really, bad. Customer service at PayPal is highly questionable – and for the reasons detailed below, I have come to the conclusion that at a commercial level, PayPal really does, for the serious customer, suck. Here is why:
- High Charges. PayPal may be easier to setup (even for the newbie webmaster – if you’re not going for seamless / invisible integration) – but it comes at a cost. The charges are high, especially when compared to to other larger merchants in the US and UK. Take authorize.net or SagePay or WorldPay – PayPal will lose every time.
- Documentation. OK, this really is not reason enough. To be honest, for PayPal Pro, PayPal offered MORE functionality and BETTER documentation. But it still wasn’t enough. SagePay is OK, but WorldPay can definitely use some improvement in this department. Trouble is, they all discourage you from taking credit card payments on your website for online merchants – because they don’t get to advertise their brand!
- Customer Service is Dead. Non existent at PayPal. We remitted money to someone abroad, about $1,500 worth. PayPal debited our account twice. Over the phone (after a call that probably cost us about $8 in phone charges), they conceded their mistake. In writing, they ignored us and continue to do so. Is it worth taking to court? Perhaps not, but it is unacceptable. Whilst we didn’t lose the money, this was a stupid mistake and one that upset our bank. The worst part was the staff’s incompetence.
- Expensive Phone Support. Yeah, call a premium number. This is only available to PayPal Pro users and you have to call a paid number to get support. Greedy bastards is the term that comes to mind.
- Incompetent Email Support.The kind of answers they wrote to us in emails would cause embarrassment to a company owned by any American (unless it’s HP). Pathetic.
- Funds Release Time. For PayPal Pro accounts, PayPal held 20% of our money for up to 90 days. 3 months. There’s only ONE word for that: bullshit. With our new provider, the money hits our account in 72 hours.
I have to be honest – the deal breaker for us was the bad service. I’m not saying that WorldPay or SagePay have genius’ filling in their tech support, but at least they’re there and they respond. Also, if there is a billing problem, you have an account manager you can call or email or speak to. That’s not to say they will solve the issue or address it promptly, but you have someone to hold accountable. At PayPal, you don’t – and they take advantage of it.
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Posted by Commie B on October 7, 2010 at 11:31 am
Having run businesses in 3 continents now, I can safely say that UK businesses need to do some things differently. They seriously need to come out of the dark ages if they want to compete in the global market – especially if they want to do what Americans have done with global business. Devious tactics, haggling and delaying payments doesn’t particularly attract quality vendors and that’s something most businesses fail to see. If price is consistently going to be the primary denominator of choosing a vendor or service, that already poses problems, but even then there are rules of business that British businessmen and businesswomen need to follow, at least to gain our respect and get our services.
1. STOP ASKING FOR PAYMENT TERMS.
UK businesses have the deranged habit of asking for payment terms AFTER the work is complete. Look – let’s grow up. If you’re hiring someone for 15 months, it is fair to ask for 30 day payment terms on each monthly invoice. But if someone’s doing fixed price work for you, you pay after the work is done – it’s that simple. What the hell do you need 30 days for to pay AFTER the work is done? If you want that, NO good vendor will want your business, which is why there are just a HANDFUL of good vendors in the UK in every industry. So, make sure you have money before you want to buy and be prepared to pay upon delivery and, perhaps, a deposit upfront.
2. COMMIT TO WHAT YOU WANT
British entrepreneurs and businessmen have slim to none decision making abilities. They seldom know what they want, and even if they do, they’re so unsure of themselves that they don’t want to commit to a scope of work. It’s particularly true of the software industry here. If you don’t know what exactly you, then you can’t get a fixed price – it’s that simple. Stop wasting our time. If you can’t commit to a scope of work, we can’t commit to a price. If you want your product to evolve over time, you have to agree to open terms – possibly on a SCRUM or some other form of Agile project management model. Of course, locals have no sense of this – bureaucracy and the pitfalls of PRINCE2 run deep in the British business bloodline, and both of these things will ensure that British business NEVER takes the lead in technology.
3. HAVE THE COURTESY TO RESPOND TO EMAILS
The concept of not responding to your emails for days at a time is very foreign to me. It’s not like they don’t check it, they just don’t respond. And then, a week later, to save face, they have to lie by saying “oh it never arrived.” Bullshit. It’s only polite to tell someone you have received the email and are going to respond soon – for whatever reason. But ignoring emails or telephone calls is just plain rude. Have the courtesy to say no – it will save you time. If you think you need to be crafty about your response – then inform the other person of the time you will take to respond. The point is – don’t be a moron – it’s bad for your business and will drive away any vendor with some self esteem (there’s just a few of these around – so you’ll get on with like minded folks just fine).
4. SAY SOMETHING MEANINGFUL OR JUST SHUT UP
Before I moved to the UK, I had only witnessed this problem with American lawyers and some of my Muslim comrades in the Middle East and Indian Sub-Continent. However, in Britain, no one ever says or writes something that makes sense and no one ever tells you when something will get done. Let me give you an example – if you ask someone when they will be able to send through a signed document, they’ll start explaining the process of who has to sign and how many secretaries and assistants someone else has – 20 minutes later there will still be no date or time. What a waste of time. When I took up my first job in the UK, my superiors would try and force me to send ambiguous emails to HQ in the US. Why? No one wants to be accountable for the rubbish they do. It’s bad news, folks. Things will catch up – you ever wonder why Brtain is not still leading the world? Let’s try and fix that rather laundering meaningless prose.
5. STOP HAGGLING AT SUB-CONTINTENT RATES
The Americans had their sweep of outsourcing technology to the Indian Sub-Continent almost a decade ago. After a couple of years, they realized it was a major screw-up, so the bigger players settled for offshoring and the smaller and medium ones decided it was better to do it right and do it in the west. British businesses, however, are plain cheap. Their attitude toward negotiating and haggling reminds me of a poster I saw at a computer peripherals store in Dubai – it read “Quality is free.” Needless to say, I didn’t buy anything there. I can’t tell you how many times people in London have told me that I should work at Indian rates or they can go to India. By all means, you should all feel free to outsource to India or Pakistan or anywhere else – and then like most of them, when you’ve lost your money, you can come back to us and pay us more. We offshore, but we know what we’re doing and we charge for it. What part of you pay for what you get do British businessmen not get? The message here is clear: pay what we ask for – we’ll let you know if we can offer a discount – otherwise we don’t want your business. Britons who haggle a lot make for difficult clients and are professionals at all the debauchery mentioned sections 1 to 4 of this article. Best to steer clear of cheap folks – sometimes you can tell by the way they talk. Sorry, this is not meant to be a racist comment, but if you use ‘me’ and ‘my’ interchangably, you should never be allowed in international business.
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Posted by Commie B on May 24, 2010 at 10:29 pm
Consumer, taxpayer, same difference. If you live in the UK (especially London), you’re constantly getting (mind the language, please) f#cked. I’ve been meaning to write about this for a while – ever since this recession story made headlines – ever since Lehamn Brothers and Woolworths went out of business, but I’ve got my own battles to fight.
Long since my reading about Fair Tax in the United States, I have been a fan of the Fair Tax Proposal. Fair Tax essentially states that you only pay tax when you buy something. This is great for the consumer; it means you spend carefully. Suppliers are motivated to provide better products and services or you could go international and the government has reason to support businesses – the former only makes money if the latter are doing well.
Although I’m not saying that the theory of fair taxation is a flawless one – it has yet to be put to test – the democratic economic system (or whatever the hell you want to call it – it’s certainly not capitalist), followed by primarily most of Europe or the UK, is nothing short of hedonism.
Most of the so called developed world, and Europe today is the leading continent with that title along with our American friends (as eastern nations witness the dark ages), financially and emotionally violate their citizens. Now I haven’t lived in other parts of Europe, so I will stop alleging that they are categorical cheats. However, it saddens me to say that the British Government, the parliament, the bureaucracy – they all function with this one motive – screw the middle man – many of these middle men are so silly they don’t realize they’re getting screwed over in the process. I am sure you all are already familiar with this and if you aren’t, well, maybe this will explain why neither the liberals nor the conservatives of Britain stuck to their principles come election time. They are all out to get you. That is their greater purpose.
OK, so I will build the entire argument on a £3,000 per month pre-tax earning. Let’s say you earned that amount this month. Now, we’ll assume that you’re not one of those compromising residents of London who’s decided to live in shared accommodation. If that’s what you aspire for, you’re most likely happy being ravaged. Some of us have a little more ambition than that.
Out of this £3000 you will end up paying over 30% in PAYE and National Insurance. Many will actually pay more than this. The small business gets penalized grossly for hiring British employees – the government’s first step to ruin the economy and promote outsourcing to the Indias and Pakistans of the world. So, back to our simple mathematics, you are now left with £2100 (if you missed it, that’s £900 for the government). Don’t know about others, but my council tax is about 5% of what I earn pre taxation. That’s another £150 gone. Now, let’s talk about VAT. Almost everything has VAT, with an exception to some of the basics. Say you spend £600 on taxable groceries. Out of this, you’ve paid 17.5% VAT. This means you’ve paid another £105 to the government. This means that so far you’ve been robbed of £1155 (that’s £900 in payroll taxes, £150 in council tax and £105 in VAT on basic household items). Now, if you have a car, you are spending another £15 a month on road tax. If you live in London, you most likely also need a monthly ticket for the tube. Now there’s no tax on the train tickets, but you don’t exactly have a choice but to buy this. It is the price you pay for living in London – pay for a seat on the tube you will hardly ever get. It’s generally called overselling and is punishable under the law (in a fair and just system) but on the London Underground it’s called ‘moving right down into the carriage’. What a load of crap – pay £150 a month to COMPROMISE on the tube. If you live in your own flat or house on that salary, you’re probably living in zone 4+. So that’s another £135 for the train pass. It goes to TFL which is a puppet of the government, so the money essentially goes in the political basket – God knows they don’t fix the trains or the tracks. Wait, we all know that.
Let’s do a recap. How much money has the government taken from you so far, between travel, groceries, national insurance and payroll tax? £1,305 out of £3,000. That’s 43.5%. Can you believe that? Pure tax or overhead for living in the UK. You get absolutely nothing out of this money. For every £100 you earn, you literally have to give £43.50 away. Now I know we’ll have those fascists out their who will claim that the UK is the ‘leading’ European country because Germany’s taxes are in the 50% range or Scandinavia is 55%. Well, let me tell you something: who gives a shit. We’re talking about the UK and London, so let’s stick to the topic at hand.
If you can manage to do much other than paying rent and buying a movie ticket or fuel for your car from the remaining 56.5% of f the money you have left, you’re probably living in shared accommodation. But read on, you’re still getting screwed.
So the fact that you don’t have much money left to spend is just the beginning of how you, the British consumer, faces the shaft. You have credit cards, a car payment, or mortgage, don’t you?
The government takes your money and invests with banks, pays ridiculous salaries to MPs, bureaucrats and council employees – many of which are hired to make sure you get threatened and penalized if you don’t pay these taxes. That’s what happens with your council tax pounds and that’s what has happened with the billions in rescue funding for banks.
So, what do the banks do with this money? They gamble and loan. The money the government takes from you and gives to the banks is EITHER loaned back to you for your mortgage, car, or in the form of a credit card or is loaned back to businesses (who may be your employer) for a hefty interest charge.
In the event that you are loaned the money, basically, the government has taken your money, put it through this ‘system’ of taxation and loaned it back to you with interest you will pay to the bank, who will then fund the election campaign with part of that money or loan the interest back to your employer who will then again deduct tax from your salary and pay it back to the government again, creating wealth from your poverty inducing 43.5%. Exciting, isn’t it. So you are not only paying 43.5%, but when you get that 43.5% back as a loan, you again pay your credit card or loan interest, in many cases up to 20% plus, back to the bank. So, in essence, you paid 43.5% + 20% of this 43.5%. So your 43.5% is actually costing you over 52%. It’s either this or some twisted denomination thereof.
Let me make this simple and clear. The government takes literally over HALF of the money that you earn. They then piss this money way on gambling, election campaigins and sham programs that have to do with community improvement or whatever rubbish they can come up with (I wish they actually implemented any of these!). In many instances, the government will give your tax money to the bank, who will then give this cash to another international bank, which will then loan the money out, at, say 20% and give your bank 10%. Your bank is making 10%, but they don’t actually have any of this cash. Hell, they’ve even take the money you’ve put in your savings account and gambled that away -all with the consent of the government. It may very well be that your bank has taken all of your money and loaned it to your friends in the form of credit cards. Because your friends are law abiding citizens, they default on the card payments - so not only is your bank unable to pay you the .8% interest it promised you in exchange for the 28% it was charging your friends, it doesn’t even have the original amount. So when you go back to claim the 50% of your salary that you had claim too, the bank collapses. Enter recession and turmoil. It’s also called horse shit.
Guess what happens next? 43.5% of your next pay cheque will go towards stablizing the bank. I don’t know about you, but from where I’m standing, you’re kind of, sort of screwed!
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Posted by Asif on July 25, 2009 at 10:43 pm
With cloud computing becoming a common buzzword along with Software as a Service and related discussions, it has becoming a challenge for many IT managers or business owners to understand which is which, how it is relevant and why any business should go for it. As with many things IT, technology professionals don’t always make it easy to understand concepts or explain them. They’re great at using names for new developments, but bad at justifying such names or explaining these concepts.
Essentially, cloud computing and software as a service (SaaS) are older concepts with new names. In a nutshell, from an end user’s standpoint, both would mean deploying a piece of software over the internet. For illustrative purposes, when you log in to your PC at work, rather than clicking on an icon for ‘Project Management Software’ you would simply open Internet Explorer (or Firefox or any other browser) and log in to a website. Here, you would enter a username and password and then log-in to your software. It’s a longer process than just double clicking an icon on your desktop, but then it has its pros.
Basically, this means software deployed and delivered over the internet. It used to be and is still called web 2.0 by some, and different names are applied to the same concept by different users from different perspectives. Yes, it is all about perspective.
Here are some of the simple reasons why you may want to use such hosted web 2.0 software offered to you as a service in the cloud:
• Access from anywhere, anytime
• No maintenance of hardware
• No maintenance of server software
• No room required for equipment
• Less investment require up-front
There are numerous other reasons, but these are the reasons almost all businesses will connect with. So, that’s why you should look into cloud computing and SaaS, but what the hell is the difference? Glad you want to know.
Software as a Service basically means paying to use existing software over the internet as opposed to in a desktop environment. In most instances, SaaS also comes with a user driven license (the equivalent being PC based in the case of desktop software), but it saves you the hassle of applying updates or doing any kind of maintenance. For SaaS, in most cases, you have a software company that has developed a product that they sell to you as a service. Examples are Zoho CRM, Salesforce.com CRM or Microsoft Exchange Hosted Services.
You pay a simple fee per user per month, and you have access to using the software. Your files, data, etc. are all stored on the software provider’s servers and depending on the provider and the software, you may or may not be able to extract your data. My favourite part about SaaS is that it is platform independent. So you in your organization you can have Mac lovers and PC users, and they can all use the software because it is delivered in a browser. It simplifies things, because people can stick to their individual cults and technology preferences without losing too much productivity within the business. Saas will usually come pre-configured and you will need no technical knowledge to start using it. Some user administration, etc. may be required, but you won’t have to do any programming to get things moving.
Now, let’s move on to the cloud.
This is best explained from a CIO or IT manager’s standpoint. So you manage an IT department which has a development team. You have to maintain servers for live and testing environments, make sure they stay up-to-date and free of viruses. You have to setup firewalls and VPNs for security and remote access, and run regular routines for security checks. In essence, you need maintenance and security function to support development and other functions of the business. It’s quite a stressful job to have and in today’s world, in many cases, an unnecessary hassle.
The concept of the cloud here is similar when applied to simpler websites. If you’re building a website, do you really want to hire people and learn how the server software and hardware works, or do you simply want a pre-configured online environment where you can place your files and programming scripts and get the site to work? That’s how web hosts came into being and now virtually the whole world fields away the hassle of hosting to professionals who do just that, hosting. Take this same context and put it into our IT manager’s scenario, and let’s say our service provider here is Force.com. Now, Force.com is the could computing environment on which salesforce.com is built and delivers as SaaS.
So, you can move your entire development team onto the force.com platform. They have their own programming language and predefined functions, you can built applications using this without ever having to worry about maintaining servers for live and testing environments, firewalls, VPN access or anything of the sort. Your development team can log in and develop applications within their environment on the internet. It’s called cloud, well, because it’s all just floating out there, you log-in and do your work and it’s always there, without you ever having to worry about a physical box or server. So, put simply, it saves you a whole lot of maintenance and security expenditure (along with other things), and you simply get to do what your development team needs to do: develop.
Now Salesforce.com may be popular in its own regard, but just to set the record straight, the clould’s early days are marked by innovation from Amazon. Amazon was probably the first company to deploy a commercially available could computing platform.
SaaS companies that also offer cloud platforms make life much simpler for developers, because if you use their SaaS, you can develop other applications on their cloud that can easily integrate with this SaaS, evolving your business and software around it. There are other technical advantages, but cloud computing and SaaS is not free of woes, especially financial ones.
It’s great to pay £50 per user per month when there’s two of you, but when there’s 500 users, it’s almost worth investing in your own equipment and development team; entirely a matter of finance and preference.
As a software development company that specializes in deploying web-based solutions, we at VAFTA essentially develop SaaS for our customers to sell to others. The development may or may not be in a could environment, and that very much depends on the needs and requirements of the business model in question. The idea here is to clarify the difference between SaaS and Cloud and help you start thinking in terms of a cloud or web environment as opposed to the traditional desktop one.
New technology is not always the right technology. Consider your options: the cloud can be cheap today but if not managed well, it can bankrupt businesses in the long run.
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Posted by Commie B on May 20, 2009 at 11:09 am
As most businesses start to make the transition from a one man show to becoming a growing enterprise, owners are faced with the difficult but crucial task of identifying information systems and processes, a major part of which today is procuring the right software and hardware. Even all large corporations are consistently faced with this task of improving the systems, redefining processes and procuring the correct hardware and software to either support the growth of the business or deliver efficiency in times of downsizing.
So what really should you consider when investing in systems? There’s a plethora of factors you will need to consider, and most of them will be driven by your organization, its structure, your employees, the culture and above all, your budget. With the technology world making leaps of progress every year and business and corporate strategy evolving with time (especially given the economic crisis of today), it can be difficult for executives and business owners to choose between what is available to them in the current marketplace. Business technology is evolving to bring more flexibility, better functionality and higher return on investment to most businesses, but getting this right means more than just going with a big name brand.
First and foremost is the illusion that businesses have about technology: it will solve their problems. It won’t. What technology will do is make available to you tools which when used properly will solve your business problems. However, the idea that spending money will result in problems going away is simply false. Getting the right technology that supports your business will certainly do this, and such technology does not necessarily need to be expensive or backed by a big-name brand.
When businesses starting thinking about procuring ERP or enterprise class solutions they often turn to the likes of Oracle, JD Edwards (now Oracle), SAP or Microsoft for answers. Whilst this is not a bad thing (given the experience these companies have with developing such software), it’s not the most efficient or effective way of going about getting a comprehensive information system. Since these companies develop solutions that are generic in nature and applicable to all businesses, they need customization that will tailor the solution to your business. What happens when business invest thousands of pounds in such software is that they expect it to start producing results from day one, an error that many major corporations today are guilty of. What you must essentially realize is that buying an off the shelf solution in this category with a powerful brand behind it will cost you an arm and a leg and will require further customization, time and money before it will start doing what it is supposed to do.
Add to this the cost of remote functionality and licensing, and you may very well be paying a lot more than your vendor originally told you it will cost. It’s all part of the game of selling technology solutions: everyone is trying to sell you their product and will undermine any other cost you may incur in getting the entire solution. You can avoid this by planning ahead. So whether you’re a business owner, an IT manager or a CIO, here are some helpful tips.
Do you really need the ‘best’ solution in the market?
Most businesses make technology and information systems decisions based on the intel they get about their competitors. Especially in times like these, many think that if a competitor is doing well it’s most likely because of their technology. That’s not always true. You should never simply invest in or buy a product or service because your competitor uses it. Neither should you make a technology investment because it is the ‘latest and greatest’ in the market.
Each business operates in a unique way with its own culture and model, and each business decision requires thinking along those lines. It is this business model that, along with what the requirements of your particular project are, should drive your technology decision.
Getting the Numbers Right
When calculating costs for a particular technology or information solution, you need to split it up between the 6 phases of the Systems Development Lifecycle. So, in essence, you need to budget the cost of:
- Planning – Must use external help for this to get a better view of the situation and your business.
- Analysis – External help over here is a must. It will help a third party clearly interpret what you need, thereby making the requirements of the entire project or solution clear.
- Design – Contrary to the popular belief that you won’t need this if you buy an off the shelf solution, you will always need this. Software does not design a system or vice versa.
- Development – For most complex pieces of software that you procure, the will need some customized development. So don’t forget to budget for this whether you’re costing.
- Implementation – You always need a contingency plan. What if implementation does not go right? What can go wrong and how will you tackle the situation. Not planning for this can be very expensive.
- Maintenance – You’ve heard that prevention is better than the cure. Well, it’s true of systems and software. Reactive maintenance is very expensive. If you’re proactive and stay on top of this, you’ll save millions in the years to come.
I’m not going to get into the details of each one of these phases, but it is absolutely imperative that businesses seek some external help or consultancy whilst involved in the first 2 phases. The reason for external involvement is necessitated by the fact that an external view to your problem can greatly aid in creating a better solution or coming up with a better proposition for business or particular situation. Planning and Analysis is imperative and this is essentially what will drive the other four phases and, in essence, the cost of the entire product or solution.
I’ll discuss a brief example of the typical defect a service-based company will make in its cost planning for procuring and implementing a new software system. For the sake of simplicity, let’s assume that this business needs a comprehensive financial management system along with project management and CRM functions to get a complete solution which can help manage projects from start to finish.
The options available to such a business are Microsoft Dynamics, Oracle, Quickbooks Enterprise or SAP. None of these solutions are cheap. Quickbooks is probably the most low-cost solution here, with annual licensing fees for 10 employees topping US $ 12,000. For each additional user you will end up paying an extra annual. Unfortunately, the same goes for Microsoft Dynamics, Oracle to SAP. Then, you’ll need to customize the interface and processes within each system to suit your business model, hire staff to manage the servers and user licensing and for maintenance. Add to the $12k additional cost for CRM and Project management modules (which may or may not work to your requirements and may or may not be available depending on which solution you choose) and you’re fast looking at an annual bill of US $50,000 a year plus initial costs and fees for deployment and any other updates and upgrades as they become available. Basically, at every point in time, you will need to spend money: whether it’s adding an extra user, adding an update for a bug fix or getting an update.
So, in this example, even though the numbers may not be fully accurate, you’re looking at a cost of around US $50,000 a year with a growing business, not US $12,000. Plus, if you are company that requires its employees to work remotely, you’ll need to pay licensing fees for Citrix or GoToMyPC, which can add up in thousands pretty quickly for multiple users.
Think Web 2.0
The world of systems and software is changing. Leading businesses and technology professionals need to think in innovative ways to bring new solutions into their business that cut cost, increase productivity and make their businesses more competitive.
With the advent of web 2.0, businesses that do smart, intelligent thinking can avoid the cost of paying for a brand name, user licensing, or extensive server management costs. From a business standpoint, it would be great to not be penalized for growing your business by having to pay extra for each license every time you hire a new employee, or drop $10,000 every time you need an additional module or add-on to your software.
If you’ve run through your planning and analysis properly, you could spend your annual licensing and maintenance fee just once (that’s right, ONLY once) and get exactly what you need, with remote access from anywhere at any time, anywhere. You won’t have to customize this. It will be built to specification. It’s also documented and you own it, so you can add as many users you want, make whatever changes you want and get internal staff to help improve or add functions at their regular salary as opposed to paying an Oracle or Microsoft certified consultant over $1,000 per day.
That’s right. When you move into the realm of complex systems and business management enterprise class software, customized web 2.0 solutions can be a cheaper and more effective option for many businesses. They’re better suited to the business model and can save businesses hundreds of thousands of dollars in the years to come. Best of all, open-source web 2.0 technology is scalable and can grow with your business. Server and hosting costs will be minimal in most cases compared to other solutions, simply because, if built right, web 2.0 software should require nothing more than what your browser needs.
That’s right, you could run your entire business from a web browser. It is the way all software is headed, so you need to consider this.
Think Open Source
I work for a firm that’s been a Microsoft Partner for years. Microsoft products are generally very dependable and they offer great support and unparalleled documentation, but they have their place. Open source software is becoming effective and powerful, and with the pool of technological talent out there and investment in open-source technologies by some of the world’s largest private equity firms, it comes as no surprise that open source software can very well support enterprise-class functions today. Whether you are a small or large business and depending on your business model, you can save thousands in licensing fees by simply using OpenOffice and Mozilla Thunderbird. Microsoft Office has its place, its user base and its functionality, but this is a cost many businesses can save with the right consulting and implementation.
Make your Own Decision
With the economy taking a plummet, sales teams across the globe have become far more aggressive than before. Businesses are fudging statistics and some are outright lying to get your business, so there’s all the more reason for you to do your homework, consult a business technology consultant and make your own carefully considered decision as opposed to believing what sales consultants tell you.
However, technology is useful if its timely and effective; so you do need to move fast.
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Posted by Commie B on May 8, 2009 at 1:01 am
Here is something that your SEO consultant or marketing firm will never want you to know: there are 2 parts to SEO. And here’s the second part of what your marketing or SEO consultant will really not want you to know at all: most SEO consultants and marketing firms do, respectively, one half each. This is a topic I’ve been meaning to write about for a while, but since I don’t spend a whole lot of time doing SEO for any of my own websites or businesses, well, I haven’t really had the motivation to pen (or in this case, screen) the issue. Now that I’m done sorting out some of the basics that I consider more important than issues like SEO and PPC marketing for a business, I’m coming back into this rather messy affair.
I can name many of my clients who consistently spend hundreds, if not thousands of pounds and dollars every month in trying to get their SEO to work. Let’s get one thing out of the way before we have the marketing folks butt-in: SEO is not the same as PPC, so let us not confuse the two. PPC optimization, although similar in some regards to SEO, is a different line of work. There are no, per se, two parts to it on a macro level, although I think you can break up PPC into two different parts if you want to get a view from the inside out.
So, what really are the two parts of any SEO campaign? Well, let’s see…
The Technological Part
If you have a marketing firm that claims they’ve got SEO down, this is the part they are most likely not doing. I personally know firms who are spending 5 figures of Great British Pounds Sterling every month in an attempt to get their SEO up and running in addition to a GBP 20k+ Pay per Click bill, but SEO is just not working. The content may very well be right because that’s probably what their SEO provider is OKAY at (not brilliant, just OKAY), but the reason that Google or Yahoo don’t give them any importance is simply because their pristine, apparently clear and clean-cut looking design isn’t so clean when you look at the source code. It’s rampant with violations of W3C XHTML and CSS standards, javascript errors, lack or misuse of meta tags, and many more to name a few. What’s worst is that these chaps still haven’t figured out what they’re getting wrong, and it’s not all their fault.
To develop their mammoth online project, they hired a technology consulting giant like Sapient, but got a possibly unqualified employee to manage the relationship. So, in essence, the code produced is not particularly garbage, but it is something most decent developers wouldn’t feel heartache about trashing. Second, the XHTML and CSS interface was developed by an idependent party which, it seems, specializes in developing interfaces that work toward the stern purpose of being non-standard compliant. The SEO company has no clue why their magic doesn’t work and the reason why that’s happening is because they don’t fully understand the business or recognize or realize the techological or technical faults that are holding the company back.
It’s the same old issue: marketing firms become web development and web 2.0 software consulting firms, create garbage product, but sell it hard by throwing money on PPC and Out of Home Advertising (OOH) and all their client seem to think they’re doing a great job, without actually realizing that they could save a huge amount of money spent on PPC every month by simply streamlining some of the technology issues involved in SEO.
I’m not going to go into what it is that you need to do to get the technology right; at least not in this article. What I do want to do is illustrate the benefit of having the technology issue resolved. Let’s be clear on one thing: with the right age and domain length and correct coding, etc. (i.e., fullfilling the techincal requirements of SEO), you’ll certainly land yourself a higher Google PageRank than a website that foscuses solely on cosmetic appearance and writing fancy content but misses the boat on writing Google friendly code. If your competitor has done this part right and you’re relying on your good old marketing man to provide you with SEO services, when somebody does search for your keywords you will end up getting the small corner to the right that google has reserved for AdWords, where as your competitor, even if he doesn’t have the right kind of content on his website (which is valid to a search term), is getting a good 80% of the screen. Who do you reckon your potential customer will click on, someone Google thinks is providing valid content or someone Google says is paying money to ‘appear’ to provide valid content. Maybe not all clients work like that: I sure do.
The Marketing Part
Okay, this is the part where you need to not listen to your SEO consultant, who knows the technical aspects of what Google, Yahoo and MSN like to see, but has no clue about how to sell. Remember, most technical people suck at selling. They like to brief and give information, not make the effort to pretend like they care about your business and sell you their skills. Hence, that’s what you need to use them for.
I can’t stess the importance of getting this part right. As much I bash marketing firms for getting the technology part of SEO wrong, ultimately, selling lies at the heart of every business. No sale means no business, so get this right!
Here is an example of how companies get this wrong: Fix all your tags and content on each page, so that when google does list you organically, people at least land on the correct page. Not landing on the correct page means you’ll never make a conversion from visitor to customer. The first part giving yourself the ability to appear in the 80% portion of the screen of a Search Engine by getting the technical portion right. The second, is to strengthen the credbility of the visitor who trusts the judgment of the search engine to list you in their organic listings by giving the visitor what he or she is really searching for.
Once there, the content needs to be right. Don’t hire a car salesman for this unless you are selling cars. You need a short, sofisticated form of copywriting, not those long sales letters that eBook copiers and MLM scammers have used and misused and abused over the last decade.
Here is the most important thing you need to take away from this article. Don’t believe everyone you see on Google or Yahoo’s first page. Most often than not people will show up and stay there until the next crawl when the search engine realizes that a certain website has cheated. So, look for decent history when picking a provider. Also keep in mind that not all businesses that do SEO spend resources on SEO: they don’t need to. They get their business from other resources like management consulting. In fact, that’s how some of the largest contracts are signed, by consultants know nothing except for how to close a deal.
Lastly, there are very few companies out there who can do SEO and PPC right at the same time and score both on the marketing and technological front. It’s the same reason why marketing guys are horrible at using technology AND the same reason why your IT guys can’t sell for shit. Get your technical SEO person to liaise with your marketing team. That’s how you can results out of your Search Engine Optimization efforts.
Lastly, always remember this simple piece of advice: you get what you pay for and here is why: opinions are free, consultations are NOT. Which one are you looking for?
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Posted by Asif on February 2, 2009 at 12:50 am
Despite all the hoo-ha about how business has become difficult in the recession and how money from banks and lending institutions is short, I am here to tell you that it is really not that bad, certainly not if you are a small business.
The reason is that most small businesses don’t necessarily depend on funding from banks. Growing small businesses certainly do, but most small businesses do not. It may be true that economy is slowing down and bad economic news is making headlines on a daily basis, but think about it, this is the opportunity for many, innovative small businessmen to move in and get the business they’ve been waiting for.
Big business is struggling. On a daily basis, you’re reading about multi national companies shedding employees. Basically, it is in times like these that big businesses actually make an effort to run efficiently, and they’re open to help and suggestions, because laying off people is not always the most legally feasible way to cut costs. Companies are looking to rewrite and renegotiate vendor contracts and if presented with a better, more cost-effective solution, almost all businesses will change. This is where SMEs come in.
Most small businesses don’t sell to consumers; they sell to large corporations. Large corporations, on the other hand, sell to consumers. This recession, like all recessions, has ultimately arised because of the consumers inability to meet the greed of large corporations, which created domino effect of cash shortage in a global economy that operated, for all practical purposes, on one cycle of credit.
For a small business, this is the time to put its savings into marketing itself as a more professional, stable, and cost effective vendor to a big business. Markets that were in the past only open to big vendors, i.e., areas of work where big business only dealt with big business, are now open to small business. The big players in the industry are short on cash. They cannot move fast enough to respond to the recessive nature of the economy, the result of which is their shedding of employees. I think the market is certainly better for many small business owners today than it was 15 months ago. To succeed in this climate, however, here are a few things you need to do:
1. Invest in marketing! It is extremely important for small businesses to appear professional. You must never compromise on quality and professionalism, especially not in a big city like New York or London. With my own business being in London, I can tell you that this is a city of first impressions. Quality of work is secondary, but if you can impress someone in London with a fancy business card and decent looking website, chances are you will be able to get their business.
2. Do what you promise! Make sure you don’t oversell yourself. This is an economic climate where, as a small business, you naturally have an advantage over big companies. It is imperative that you let your clientele know up front what it is that you provide. Remember, your primary selling factor here would be helping them cut cost, so they’re naturally adept to understanding that they may lose out on some features that another, more expensive vendor may have been providing. The trick to keeping the big client: Deliver what you promised!
3. Call your own office to check to see what your reponse is like. If you are a single person business, setup a vitural PA service. Remember, that depending in which country you are in, having an answering machine is not always a wise thing. In the UK, people do not leave messages, and they’re not too happy if the person answering their phone is not extremely friendly. Don’t compromise on this. If you lose an incoming call, you may very well lose thousands in business.
4. Update your website and check all the forms on it. Don’t make this mistake! So many businesses lose out on potential clients because the contact forms on their websites don’t work! If you sell products online, keep it simple! Don’t flood your users with information or questions. Keep the experience clean and provide enough information for them to got through with the sale.
5. Know your market! Yes, when I first moved to the UK from the US, I thought that having state of the art technology for my clients was the way to go. Turns out, that’s not the case. You must stick to what your customers are comfortable with. If you conduct too much work online or via web 2.0 technologies, it may be very efficient for you and your businesses, but your clients may not be comfortable with it. Digital signatures, submitting complex work requests, and smooth sailing one click credit card ordering is ONLY viable for advanced societies like the US. In other markets (like the UK), for instance, people are more comfortable exchanging word documents by email rather than by submitting all of the required information via an online form. So, don’t do what looks good and efficient, do what people will work with, because that’s how you will run your business.
6. Once you’ve captured your market, evolve your product or service to keep the client engaged. Businesses are always looking for more and better. That’s the reason why Microsoft sells millions of copies of every new version of windows and office that it releases. Stay on top of your game and know your market to keep the customer engaged.
Lastly, don’t let the bad news get you down. Remember, this may very well be an opportunity for many of us to grow our businesses!
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Posted by Commie B on December 14, 2008 at 8:41 pm
Several of us, including myself, at some point, had decided to make the leap from being employed to going self employed. I, myself, had bought into the whole concept of being your own boss, working your own hours, and marking and measuring one’s own success. Indeed, having your own business, generating your own income, choosing your clients and the people you work with are all big pros of being self employed. In fact, having everything in a business work the way you want it to work is fantastic! What else? You get to have a fancy business card that says Managing Director or Chief Executive Officer, and you stick your neck out and talk to everyone like you own the world. That’s all great, and the feeling of success if you thrive at being self employed is unmatched, but what are the odds that you will succeed?
Let’s be honest; odds are a big part of this whole deal. However, that is not all there is to it. What I want to do in these sets of “Running your own business” articles is to tell you part of what it will take to make the shift from becoming employed to becoming self-employed. What that means in English, for those of us who don’t like fancy corporate talk, is that I will try and outline what it will take you to go from being someone’s bitch to becoming your own boss.
Let’s get the assumptions out of the way first. You have an idea, and you’ve done your market research. If you haven’t, look for any book that tells you on what research you need to do to get your business off the floor. Market research is critical, as is good marketing. But what you need to keep in mind is that having a good product / service and a good marketing strategy is not all you need for your business to succeed. These are your basic requirements. No product / service = no business = no money = keep the job = stay in bitch mode.
So, what do you need to execute your own marketing strategy, sell your product or service, perform, and walk away with or retain a happy customer and a big cheque (or check if you’re in the US)?
The Three Ds of Entrepreneurship
Drive
Drive. Drive. Drive. By the way, that’s just ONE of the 3 Ds spelled out 3 times. Yes, you need drive. The drive to succeed, to sell, to perform, to win, to dominate and to not be somebody else’s bitch. What is important here is for you to have the mind set to break out of taking orders from someone else. That was the reason I chose to become self employed. I knew I had the skill set. I knew I had a unique deliverable, even if my service was competing with others out there, and I knew I had a decent marketing strategy. But above all of that, I had the drive to do business. The drive to be better than my former co-workers, and the drive to make it happen. Unless you cannoy work 16 hours a day 5 days a week and survive on 4 hours of sleep every night, going back to a job should not be an option. Business is going to succeed if you go all in.
For a more graphic explanation, think of driving only ONE car at a time. You can’t drive two, and if you try to drive two, you will wreck both. There are few who can handle both a job and a business, and unless you are that hardworking, I suggest you stick to one thing, and give your whole hearted attention to driving that one vehicle, which, in this case, would be your business.
Dedication
Remember how you sometimes had nothing to do at work and you went around chatting to all the different people at work, browsing the web, looking up old friends on Facebook and waiting for that clock to get to 5 pm so you can get up and go home? Well, those days are over. With a business, with an entrepreneur, with the drive you need to succeed, the clock does not tick from 9 to 5. It’s more a case of 9 AND 5. You have to get the job done if you want to get the money: it’s just that simple. This means working many extra hours even if you undersold yourself, delivering an excellent end product because you are the boss and no will be around to check your work), and not wasting any time doing silly things you did on the job. You must dedicate yourself, your attention and your energy to your business. If you aren’t dedicated, it becomes extremely difficult to manage your time (especially if you’re working from home), deliver a customer satisfying product, or resisting the temptation to log into MSN and Yahoo Messenger and chat up your old friends. You must re-arrange your priorities and dedicate a specific number of hours to your business DAILY, or you will never get around to actually doing the business.
Determination
This is probably the D that most startup and small business owners struggle with. You have to be totally and utterly determined to succeed, or you simply won’t. Get used to hearing know and listening to negativity. The odds are against you, but keep in mind that knowing that only puts you in a position to be better prepared for these odds. It’s not easy running your own business, and many people struggle with how difficult it is to get things done, primarily because as a small business owner you are dependent on other people. But the trick is to keep plugging away. If you are determined to succeed, you will eventually make it happen.
Ultimately, determination is about mindset. For someone who is determined, something that goes wrong is one failed attempt at doing something. For another person, the same thing going wrong could mean loss of hope, and that’s the one thing you cannot have as a small business owner: loss of hope. Stay focused, stay determined, stay on track and make sure that you are persistent and remind yourself of how determined, dedicated, and driven you are to succeed and get the job done.
Stay tuned for more small business and entrepreneurship articles.
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Posted by Commie B on November 15, 2008 at 9:54 pm
Taxation has always been a source of concern in the US. Income tax in particular has caused more controversy than any other type of tax levied in the history of the country. From the time the country was formed in 1776, from Alexander Hamilton’s Federalist No. 21 explaining why taxing states and individuals on the revenue they earned was by no means justifiable, people have come up with arguments against the now current system of taxation.
For a good 124 years, the US functioned with a system of taxation very similar to the proposed FairTax[1]. For the last 100 years or so, however, the country has functioned fairly well with the current income tax system too. In fact, the US has excelled in world politics and economics in the last 100 years far more than it did in the first 124 years. It has become the global economic, political and military leader during the last century. Some might argue that the revenue the government earns (via income tax) has nothing to do with it; the mere fact that the country matured over time might be enough to explain US dominance in the world today. However, for the government, or Congress, who benefit from the income tax system, the maturity is hardly relevant justification to weaken the position of the income tax system.
The FairTax plan proposes to replace the federal income tax, including capital gains taxes, all payroll taxes, the estate gift tax, and corporate and self employment taxes, with a single stage, 23 percent federal sales tax on the sale of all new goods and services at the final point of purchase. No family or individual will pay taxes on basic necessities, because of generous rebates built into the FairTax plan. Such rebates make the FairTax much more progressive than the current income tax system, refunding all taxes paid on consumption expenditures up to the poverty level for families of various sizes[2]. The FairTax is revenue neutral, that is, the 23 percent is calculated based on the expected change in consumer spending due to the change to FairTax while keeping governmental revenue the same as it is under the income tax system.
Support for FairTax has grown to a peak recently, with more than 20 members of the Congress co-sponsoring the plan introduced by Rep. John Linder of Georgia[3]. People in favour of switching to a Fair Tax have given numerous arguments against the Income Tax System that the Fair Tax solves for them. However, they all suffer from the same fallacy. From the very first argument given by Alexander Hamilton in Federalist No. 21 to any argument you can find in support of the Fair Tax today, anyone has yet to mention the advantages or benefits to Congress or the US government. Supporters of the FairTax in the enthusiasm and rush of excitement based on the advantages that FairTax will bring to them have evidently forgotten who makes the decision.
Given that in the purest form of democracy Congress and the government are supposed to do what the people that elected them want, we must understand that bureaucracy and corruption of politics make sure that none of the purities of democracy come into play. That being said, we must understand that Congress’ most powerful resource for raising revenue on a relatively short notice as well as controlling the public is the Income Tax[4]. Now, keeping in mind these factors, if we were to look at any of the arguments in favour of Fair Taxation, they give Congress no reason whatsoever to switch from the Income Tax to the Fair Tax.
The only reasonable situation under which the Congress or US government would even consider thinking of the FairTax would be when they are told exactly what they gain from it. If it is to their advantage to switch to the Fair Tax system, then there is a reasonable chance that they will do it. Think of the United States of America as a big corporation and think of the Congress as upper level management. When someone proposes something to management, they must tell them what good it will do to them. If it is to their benefit, they declare it as being beneficial to the corporation. If it is not to their benefit, the proposal hits the recycle bin. Whether a decision based on such management criterion is ethical or unethical is a different argument; the unfortunate fact of the matter is that this is how the system works. We have seen that in the business world recently (with Enron and MCI Inc.) and unfortunately the US government leads with example. The stakeholders, or in this case the general public, do not have much of a say in how anything works. Just as the shareholders do, the public elects the government and the Congress and is then at their mercy.
Having established that, we now need to see what Congress gains from the FairTax. Every year, the IRS spends millions of dollars on tax audits under the Taxpayer Compliance Measurement Program (TCMP), trying to make sure that people pay the amount of taxes they owe. The problem arises due to the extremely complex income tax system. Majority of the population is not aware of whether they should file a tax return and if they should, how they are to fill out the complicated form(s) that makes the lives of even the most qualified accountants and tax professionals miserable. In 1997, the General Accounting Office, in a tax gap report said:
“The TCMP (Taxpayer Compliance Measurement Program) data showed that an estimated 33 million of the 42 million taxpayers (82 percent) were not assessed a fraud negligence penalty, suggesting that much of their noncompliance was unintentional.”
This merely shows that the income tax system has become too complicated for people who cannot afford accountants. Research shows that even the expertise of the latter no more guarantees correct tax calculation. In the annual Money magazine surveys 50 accountants prepare a hypothetical middle class couple’s tax return and come up with at least 45 different answers each year. This is a major indication that the tax system is too complex for even the tax professional.
Due to such complexity, the IRS has to spend money auditing innocent individuals who are unaware of their tax liability. In most cases, whether penalties are assessed or not, the money spent on the audit is not recovered by the amount of tax these people end up paying. As mentioned above, 82 percent of the people’s inability to pay tax was due to their lack of knowledge about the income tax system.
The FairTax will not only make the life of the IRS simpler, but it will also mean that they do not have to spend as much money on audits as they do under the income tax system. Under the FairTax, even if we assumed that every business in America was a retailer and required to file a tax return, no more than 19 million businesses would be required to file returns compared to over 154 million returns (of all types) filed today[5]. This would mean a reduction in the amount paperwork filed to and processed by the IRS, literally hundreds and thousands of dollars in all the excessive paper that floats around (despite the IRS’ valiant efforts to encourage people to file online).
Alongside, if every business in the country were to be audited, the IRS only has to audit 19 million businesses, there by reducing amount of audits conducted by almost 55%[6]. As of 1997, the IRS spent over$ 4.5 billion on tax audits. Under the FairTax this figure would also be reduced by 55%, thereby making it $2.025 billion (in 1997). Also, since fewer returns would have to be processed, the IRS would not require half the staff it requires now. In 1997, the IRS spent a whopping $ 1.78 billion on the management of the organization itself. These costs could be cut substantially under the FairTax (due to fewer returns needing processing), giving the Congress billions of dollars to play with[7].
However, the issue of ethics comes to mind the IRS has to lay off employees. Such employees would now become part of the private sector, thereby, again saving the government money in the form of wages, pensions etc. Also, because under the FairTax, what you earn will be what you take home. Americans will be able to save more and invest more. The FairTax will, therefore, dramatically increase investment levels compared to levels that would have been achieved under the current income tax system[8]. This means that the US economy would grow, thereby producing more jobs in the private sector, creating employment for the then ex-IRS employees. Although such a transition would take time, the long term effects would benefit the Congress, at the same time helping the economy grow.
A major source of concern expressed in papers in favour of the FairTax has been the excessive amount of money spent by the private sector in complying with the IRS code. Arthur Hall, a tax Foundation economist, estimated compliance costs at $ 225 billion for the year 1996[9]. Compliance costs have become such a massive number not because that’s what it takes to follow the tax code but because due to its complexity, “holes” and problems have been created that even the IRS and writers of the IRS code are not aware of. Money is spent on locating these holes and exploiting them to minimize the tax liability of people. If the tax code were simpler, there wouldn’t be as many holes or chances of exploitation or what can sometimes be classified as unintended errors by the tax professionals themselves who proudly discover such problems in the tax code (for an hourly fee that most heart surgeons charge during surgery), thus meaning that the IRS would not have to audit people who were trying to work their way around the tax code.
The FairTax makes compliance with itself relatively simpler. A flat national retail sales tax would eliminate so much of the trouble caused by the variable income rates in the income tax system. Moreover, the simplicity of such a system would not leave much room for exploitation of the tax code, thereby reducing the amount of money wasted in the economy on compliance with the tax code (and by the IRS to assure such compliance) and making it available for the private sector to invest in and help grow the economy.
There is, however, one problem that has been brought up in discussions that is thought of to be prevalent even under the FairTax system. As of today, there are millions of businesses out there that misrepresent the amount of sales tax they owe to the government / charge to their customers. The 23 percent proposed FairTax rate has been calculated keeping in mind based the sales tax that is actually reported by such businesses. In my experience as a business owner, and as knowing others who own small businesses, about 30% of the sales are not reported[10]. This means that most businesses are actually not reporting 30% of the sales tax that they owe to the government. Opposition to the FairTax argues that the FairTax will in no way improve such misreporting of the FairTax. However, I beg to differ on that.
The amount of money the IRS spends on making individuals (not businesses) comply with the tax code is phenomenal[11]. Let’s assume that of the 154 million current tax payers, if 19 million are actually businesses that need to charge and report sales tax, there are 135 million individual income tax payers. Under the FairTax, the billions of dollars saved on making these people comply with the tax code would be saved. Since there are now only 19 million taxpayers, it is very possible for the IRS or any other tax implementing authority to track every business and all the sales via an information system that centrally holds and stores all the sales data from these businesses. This, again, will not only mean more control for the IRS over the taxpayers (which should be heavenly for Congress), but after an initial investment it would mean an extensive amount of revenue generation.
With the current technology, it is possible and very feasible for the IRS to host a database (or to outsource it to someone) whereby they keep track of Point of Sale (POS) terminals in every store. This would mean that every registered, legal business (at least retail) can only use sale terminals that are sold or authorized by the IRS, i.e., linked to their database so that they can keep track of every sale. This would greatly reduce, if not eliminate misreporting of sales tax dollars. Better yet, even if the IRS will conduct and audit of all 19 million business annually, they can make sure that these businesses are not using any unauthorized terminals. Auditing costs for the 19 million businesses stay the same as under the income tax system (saving the money spent on the other 23 million audits as per the General Accounting Office report); the question now remains of the investment required to design such a system. As mentioned earlier, the IRS would only spend about $ 2.025 billion on Tax Law enforcement with the 19 million businesses. That leaves them with another $2.5 billion as of 1996. This investment alone from 1996 should be enough to cover the cost of building such an information system.
Better yet, if the IRS out sources the productions of POS systems to manufacturers who already produce them, they can be made compatible with the new system with minor hardware and software changes. This could also include a business opportunity for the government where they could produce and sell such units; thereby generating more revenue for itself. 19 million is a traceable number; 154 million, however, is probably not. Also, this would only be a one time investment with relatively small maintenance costs in preceding years and if it is done right, a manufacturing business that would more than cover all such costs.
Lastly, a benefit to Congress; be it more political than practical, nevertheless, will exist with the acceptance and implementation of the FairTax. Today, the US claims to be the closest thing to a pure Capitalist economy in the world. One of the major determinants of a capitalist or market economy is generally consumer’s ability to use the items in demand according to his/her ability to pay for such items. Based on that very principle, consumers should be taxed on their ability to pay for consumption of goods in the economy, rather than their investment in the economy. The current income tax system, however, does not do that. Whether people use the money to reinvest it into something or to actually spend it on an end product, under the income tax system they are charged income tax on it. No matter how steeply the tax on income is graduated, it does not necessarily make an income tax progressive over the course of one’s lifetime[12].
Innocence on part of the American public, but if they were to see how the income tax system (in the American economy) violates the very basics of the (capitalist) system it claims to be best representative of, they would express such severe dissatisfaction that would make the life of Congress rather miserable (as most would think they deserve). The FairTax solves this problem just like it does the others. As suggested in a paper on http://www.fairtax.org titled “Fairness and Federal Tax Reform,” the author writes that:
“…the FairTax, far more than an income tax, is based on a taxpayer’s ability to pay precisely because it is based upon consumption. Whether or not a taxpayer can consume for personal enjoyment is a more accurate litmus test for whether or not that taxpayer has the ability to pay (for consumption of goods and services produced by/in the economy). When taxpayers do not consume for personal enjoyment, but have income, they must be saving or investing those resources. When taxpayers save and invest, they contribute to public welfare (and they should not be taxed on contributions to public welfare).”
The income tax system is known to be in violation of the US Constitution in its purest form. Although such a violation of the US Constitution does not concern the international community, the US claim to be a highly capitalistic and free society can come under some scrutiny due to the income tax system. In its purest form, the income tax system is no different from the roots of communism, which gives the governing authority the ability to control the population, take their money and distribute it as they see fit. Upon reflection of the income tax system, the US could be blamed for practicing the very idea that it has opposed over the last century; which caused it to aid other enemies of Communist Russia in its destruction. If light were shed on such issues on the international community, it could arise some very serious questions as to the validity of the political dominance (without any military intervention) of the United States in the world today. It is, therefore, to the benefit of the United States government to move away from the income tax system before the international community receives a “wake-up call.” Although such political ramifications are not the topic of this paper, their mention merely shows the advantage of switching to the FairTax (which is the goal of the paper).
True as it is, there is no guarantee as to the accuracy of the numbers proposed by the evaluators and supporters of the FairTax. However, the numbers available for 1996 and 1997 show that switching to the FairTax will not only increase the available cash to the US government, but with the predicted growth of the economy due to the increase in consumer spending, tax revenue will also increase over the years.
I believe that switching to the FairTax brings more than financial advantages to the Congress and the US government. It will validate many claims that the US makes in the international world about being fair, just and providing a free environment for its people. More than that, it might give Congress the respect and willingness to comply that it would like from the population. In that scenario, they do not need the control and power that income tax system (in the opinion of most free citizens) unnecessarily gives them.
I wrote this paper in my junior year at university. I still believe that fair tax is probably the fairest and best way to go with today. Living in the UK, you really learn to appreciate the US tax system, fair or not, it certainly is a blessing compared to this country. In the UK, the government takes approximately 57.5% of your disposable income in the form of PAYE, National Insurance and VAT. There are other additional taxes and payments that are imposed on UK residents, with the net tax for some totaling about 65% of gross income earned. Is it just me, or does that reflect on the lack of the British people to protest? You decide!
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Works Cited
[1] Origins of the Income Tax. Research and Support. Americans for FairTaxation http://www.fairtax.org/origins.asp.
[2] The FairTax and the Federal Revenue Income Tax: A Comparative Analysis. Americans for FairTaxation. http://www.fairtax.org. For further information plese see, “The FairTax Plan,” Americans for Fair Taxation.
[3] Picket, Joseph. Slay the Withholding Beast. June 5, 2003. http://www.cfif.org/htdocs/freedomline/current/guest_commentary/fairtax.htm
[4] For more information refer Dr. Scott Butterfield and his cynical lectures on Income Tax. College of Business, University of Colorado at Colorado Springs.
[5] See SOI Bulletin, Winter 1998-1999, table 12, p. 210. Note: Sole Proprietorships with less than $ 2,500 in annual receipts excluded since the de minimus rules in the FairTax would not require most of them to file returns.
[6] (42million -19 million) / 42 million x 100 as per the General Accounting Office Data.
[7] FY 1997 IRS Budger Request. IRS Fact Sheet # FS-96-06. IRS News Releases. February 03, 1996. http://www.unclefed.com/Tax-News/1996/Nrfs96-06.html. © 2002, National Tax Services, Inc.
[8] Jorgenson, Dale W. Ph.D. The Economic Impact of Taxing Consumption. Harvard University, Testimony before the Ways and Means Committee, March 27, 1996.
[8] Jorgenson, Dale W. Ph.D. The Economic Impact of Fundamental Tax Reform. Testimony before the House Ways and Means Committee, June 6, 1995.
[8] Jorgenson, Dale W. Ph.D. The Economic Impact of the National Retail Sales Tax. Harvard University, November, 1996.
[9] Federal Tax Compliance Costs Climb to $225 Billion. Tax Features, Tax Foundation, March 1996. See also, Match 20, 1996, Dr. Hall’s testimony before the House Ways and Means Committee.
[10] Personal Experience, it does not get any more authentic than this.
[11] The exact figure would be some part of the $ 4 billion spent; however, there is not enough information available to compute it.
[12]Kahn, Joseph. Examining a Change to a National Retail Sales Tax Regime: Impact on Households. Decisions and Ethics Center, Stanford University, unpublished draft position paper, November 1996.
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