Thursday, July 5, 2012

The true cost of e site startup

By Arshad Chowdry

Every day someone asks me how much it costs to build a mobile phone application, a website, or an e-commerce site. As a co-owner of Crowd Interactive, and the CEO of an online 360ยบ performance review service called ClearGears, I'm acutely aware of the costs associated with building and running online businesses.

Here are a few guidelines to help get your head around your overhead:

Informational websites are cheap, often free: You're in luck if your site is informative rather than interactive. You can build a Wordpress site in a matter of hours if you're not picky about design, and in weeks if you hire a designer. You probably do not need a web development company to build an informational site. You can probably hire one person to design and build your site. Development is expensive: Mobile and web applications and stores are interactive and more expensive. Smart web development companies will bill for their services like a law firm--for time and materials. The more time it takes and the more people involved in building your system, the more it costs. Some companies will charge a fixed fee--and then they deliver late and lose money.To build an online store or application from scratch expect a team of 4 developers to spend at least 6 months designing, implementing, testing and launching it. At $50 per person per hour, working full time each month, the monthly cost is $32,000 per month. In this case you would pay $196,000 over six months.

Development doesn't end: Development costs don't decrease after launching. They can actually increase. Consider,, or even Facebook. All of these companies spend millions each year on innovating and changing their site. Innovation aside, the changing nature of Internet--and how we access it--forces companies to constantly update their sites. As browsers and hardware change, your site must also change.Business growth requires more development: When you first launch an online store the volume of sales might be low enough to handle sales with an email sent to one or two people. But once you start handling hundreds or thousands of orders and returns, you'll need a custom solution.Customer service is expensive: The best online sites also have the best customer service. In fact, customer service may help you grow faster than a sleek design or adword marketing. Customer service is also people-intensive, so you will need to pay staff to answer phones, respond on the Facebook wall, and even write hand-written notes to new customers.Success is expensive: By some estimates, Facebook spends over $1 million per month on electricity. While your business may not become as large as Facebook, you will have to consider the extraordinary people, hosting, power, and equipment costs that come with running a popular site. I have seen clients paying over $20k per month for hosting services.

With all these expenses, you're going to need to get resourceful.

Some strategies to reduce costs:

If you're just starting out online, use a templated system like Magento, and Implement custom designs on top of those. Use the templated system until you've established a following, great customer service, and business viability. Build a custom site from scratch later. Build a following through blogs and real customer service. Winning business is not about SEO, paid search, or a glitzy ad campaign. Early on, it's all about connecting with and impressing one customer at a time. In practice this means hand-written thank you notes, sending people info that you think they'd enjoy, and reaching out to them for advice. Don't spend on traditional print marketing. Spend on online marketing exclusively. When you do think it's time to advertise, skip the posters, radio ads, and other traditional marketing. Instead try to get in front of customers with helpful blog posts, paid online search, and Facebook.
Some cost-reduction strategies to avoid:

Don't have your friend/husband/neighbor who is a designer build it for you for free. Building an online business is a massive endeavor. Unless you're formally becoming business partners, don't ask friends and family to build your site or application, because you'll probably ruin both your business and your relationship at the same time. Don't rely on unpaid interns to build your online business. You want three things in your technical partners: competence, stability, and accountability. You may have a really sharp intern, but if you're not paying them and they plan to leave at the end of the summer, then you won't have stability or accountability. Don't put the cart before the horse. If you're selling stuff, don't load up on inventory until you have traffic to your site. The great thing about the Internet is that you can sell inventory you don't even have yet. You can measure clicks and orders to determine how much of each product you should carry, and only after collecting some real data should you start holding much inventory.
Keep all this in mind before you quit your day job to join the startup gold rush. For online startups, cash is king, and your access to it can determine your success.

Arshad Chowdhury, a serial entrepreneur who is passionate about improving life at work, is CEO of ClearGears, a software as a service business that replaces traditional reviews with real-time, social feedback. Prior to developing ClearGears, Chowdhury led two culture-first ventures: a web-consulting firm called Crowd Interactive, and a fatigue-management company called MetroNaps. For more insights, read Arshad's blog and follow him on Twitter.

- Posted using BlogPress from my iPad

Thursday, June 21, 2012

Nation with majority business owners

The current structure of the world economy is focusing on business development for major business so that job opportunity is created.

I am in front of Kaabah, and was thinking how a nation will be if let's say 60% of the population are business owners.

Majority of the population will be thinking how to improve their business and to excel in entrepreneurship. How will this kind of mass brain exercise will contribute to the nation.

I really believe that strengthening the initial or micro equity platform will really transform the economy of a nation.

This could be well a policy to be initiated by the government of Malaysia in reducing the equity ownership gap of various races in the country.

- Posted using BlogPress from my iPad

Location:As suq As Saghir tunnels,Makkah,Saudi Arabia

Monday, June 11, 2012

Creative economy

Something that I believe vital to Malaysia is the human development to the stage that the economy can be converted to creativity or new product and services development stage.

It will be very important that the government should be doing more than tax incentive to bring Malaysian brain back to the country or at least make sure the best student do not leave the country.

Government spending on making sure these developers and inventors to stay in the country will benefit more in economic development of the future. Malaysian workforce are no longer cheap that makes it economically viable for companies to build manufacturing facilities. Malaysia have to go beyond economy of scale manufacturing.

Universities with talented students should be funded accordingly to come up with more invention and product design.

Talent drain in Malaysia will cause harm to the country in the long run. Malaysian government had initiated a program but, I strongly believe that inventors, idea generators, concept developers should be given a more than tax incentive, but grant or leading them to agencies that their skills can be made to actually invent things that will not only generate economic development but also spur creativity materialization amongst Malaysian.

- Posted using BlogPress from my iPad

Sunday, June 10, 2012

Method of transition to Gold gram currency

I like to call it gold gram currency just to indicate the weight of the gold in assessing its value. Most Muslims understand it as Dinar.

One of the state in Malaysia uses Dinar, while the country is still using Ringgit (RM) as its currency. Currency usage can't be executed in isolation. It cause more harm and uncertainty that is detrimental to the user.

Example when one purchase paying in dinar, the next day value of dinar went down, and thus causing the problem of holding dinar shrinking in value. The seller ended up losing value of gold in his possession, and may end up losing, since the gold will be used as working capital that is subject to daily fluctuation. Though it may be different if holding the gold for long period of time.

Transition to Dinar may begin by pegging the RM to gold value. Once this is happening, slowly change it to using real gold and silver.

With the current electronic environment, there is really no need to carry kilograms of gold for any purchase.

I strongly believe that transition to using Dinar is possible and will be beneficial to the country, provided that it needs to be done at macro level.

Wednesday, June 6, 2012

Real value currency

We all know that the current paper money was supposed to be backed by gold or precious commodities. In another words, bank should hold enough valuable commodities for each currency they issue. This is not happening anymore as the value of the currency is now based on value determined and backed by the issuing government, it is also called fiat money.

Thus, we are now in the world depending on governments of the world to be responsible and trustworthy.

Though some argue that it is backed in the value of goods and services a country generated. Lets discuss it from a service value situation. Imagine a government that uses a lot of services from the private sector. Valuing the services value is the judgement of the government. One government may value a cleaning service to be 1 ounce of gold while another government value the same service at 2 ounce of gold. Should the value of the country and currency based on this method? How fair it is in the international trade, when exchange is happening using a currency based on those principles?

Think about the stock market. A company may originate to sell their shares in the market for a value around its net book value, the shares are traded and suddenly become 15 times its net book value. It is only a perceived value of ownership of the part of the company. The perceived value is further traded in other derivative markets. As you can see, the real asset is the company vs the value published around the world may not present reality. But most of us are educated to accept and believe in it.

Thus we are now in the world depending on government of the world to be responsible and trustworthy.

Have you ever wonder how easy it is to print money, during chaos or during period of war? There will be no eyes watching anymore.

I believe should Bretton Woods concept are applied in the world today by every government and irrevocable, we should see a more stable and fair world.

Ability to revoke the system seems to suggest the system was only design to educate and increase confident of using paper money in international trade. Once it is accepted, cut the link to real value and start with something easily manipulated. Don't you think?

Sunday, June 3, 2012

Car Equity Ownership

If interest free economy is to be materialized, I see potential change in car ownership system in country like Malaysia where the cost of imported vehicles are double the real market price due to tax and permits cost.

Perhaps government could introduce, car rental system where tax and permits are reduced to a point where in total the lessee will pay only the total cost of the car after a term of 5 years.

Simple example will be a Honda Accord will cost USD 46K and with financing for 5 years monthly payment of USD 1,073 per month will be required. Thus involving interest of USD18K ignoring time value of money.

Imagine a system where the government tries to inculcate equity ownership. This may be an option.
Honda Accord will actually cost USD 22K outside of Malaysia. If the government introduces the car equity ownership, there should be a place or a centralized car ownership system properly legislated and protected where individuals with money will buy the car, and subsequently rent it to interested parties for USD767 per month that will bring the total rental payment of USD 46K, equivalent to current selling price of the car without interest.

It sounded beneficial to the people while being disadvantageous to the government. Lets analyze it a bit further for simplicity ignoring time value of money and subsequent ripple effect.

Government will lose out about USD16K++
1) Loss of USD 21K over permits and internal tax.
2) Loss of 30% on USD18K income tax over the interest earned by the bank.
3) Gain of USD3K on distributorship earnings
3) Gain of USD7K on income tax of lessor’s profit of USD24K

Lessee will gain about USD18K from savings on interest. Increasing the lessee's disposable income for further economic spending, which will subsequently generate income tax revenue for the government.

Lessor makes USD17K net after paying 30% tax on USD24K profit that will further be translated into economic spending or further investments that will generate income tax revenue for the government.

Banker will lose their net after tax interest income of USD13K

Looking at this simplified calculation Government lose out USD16K, Bank lose USD13K while the people profit USD35K. Look at it from the country point of view and you will realize that overall it is more beneficial.

Interest Free Economy

I wonder how the world will be like if there is no monetary interest. The idea of stoping money from multiplying with time. The idea that wealth should only be generated through hands on hard earned ventures.

Imagine a society where wealth are generated only from goods and services, and making money using time is only on the goods and services not on its medium. Everybody will be working towards getting more money by putting more effort to produce. It is very fair as those that work will be rewarded more than those who doesn’t. Since there is no other way to generate money, society will be forced towards a hard working society.

Imagine the moderate growth the economy will be experiencing, prolonging the optimum standard of living. It feels like the fast economic development via unexisted wealth of debts only reducing the standard of living with influx on money when the physical goods and services does not increase in tandem.

I believe the world will be better off without interest, and grow naturally via genuine goods and services output.