23 Financial Issues with Your Web Site
The throughput over expense ratio provides a simple but powerful
method of comparing the financial effectiveness of alternatives.
If you internalize the throughput over expense ratio and apply it to
your organization,
and specifically to your internet operations,
you would eventually think of and ask the following game changing
questions. They are listed below to save you some derivation time.
Initial question.
1. What is your throughput over expense ratio by operation?
•The first thing in the way of your answer is service units mixed with dollars
•Pin down the main service unit for each non-revenue operation.
•Assign a dollar value to each type of service unit and convert those unit totals to dollars.
•You eliminated the most of the fuzziness in your thinking about your operations.
•Now you can answer the question What is the throughput ratio for each operation in the organization?
•This analysis approach immediately highlights 1)Non-revenue producing operations and 2)the tenuous cause and effect relationship between revenues and a majority of actions in each operation.
Peter Drucker, premier American Business philosopher, said "Nothing happens with out the customer". Without the customer there are no revenues. Doing things not in service of the customer or client do not add revenues. Now you are thinking like executives who turn around and build businesses.
Now some more questions based on the throughput ratio.
2. How can those revenues be increased?
3. How can those expenses be decreased?
4. What additional specific expenditures by operation are planned?
By expenditure.
5. What will the marginal increase in revenues be as a result of those expenditures?
6. What will the impact on end user satisfaction be?
7. State the schedule, over all budget, and planned benefits.
8. What are the risks which will cause variation in the above plan?
9. What aspects of the project require web programming or development?
10. What makes you think it will succeed? Keep in mind, 60% of all IT projects fail in terms of schedule, budget, or benefits.
11. Where does this rank on the complexity scale? Do we have this running and performing well here in our organization, do we have something similar we can re-purpose, how much of this is using established proven solutions, how much has to be developed, how much is a potentially expensive learning experience?
By operation.
Apply the principles of zero based budgeting, take a hard look at the performance of the operation and seek alternatives at each level. Quit throwing money at bad processes and bad decisions, get a plan that drives the throughput ratio.
12. If we were to start over, would we do the same thing in this operation?
13. Would we do this operation at all?
14. Why not walk away from this mess, and do it a better way?
15. What issues are causing bottlenecks and how to remove or speed?
16. How can we salvage or leverage parts of that sub-operation to reduce future expenses or maintain the revenues which are being produced?
Specific to Internet operations.
17. What are the throughput expense ratios for the five major areas of internet operations?
•End User Satisfaction
•Site Performance and Quality
•Mobile Readiness
•Search Engine Optimization
•Domain promotion
18. If you do not have a truly mobile ready site, what will the impact on the above numbers from losing at 30% of your end users of the site? Answer using the throughput ratio.
19. What is your return from Search Engine Optimization? If you do not have a Search Engine Optimized site, why are you bothering with a site at all? The only traffic you will receive are those who find your domain through other means. While this can be a viable strategy if you aggressively push your url into the hands of your target clients, you must decide if that is your strategy.
20. What forms of domain promotion are in place? Determine the throughput ratios for the following processes (in descending effectiveness)
Direct
•Direct email contact.
•Referrals
•Direct postal contact.
•Direct sales contact.
•Industry directories.
•Industry trade shows.
•Sponsorships.
•Direct phone contact.
Passive
•Mass media, billboards,
radio, TV, other
•Blog
•Video Posts
•Social Sites
21. What experiments are you running using throwaway money? Throwaway money is money you can afford to lose doing an experiment. Experiments are simple, cheap, easily killed off projects, intended to assess the viability of a throughput ratio increasing strategy.
Classifying an expenditure as an experiment, immediately keeps the amount of lying down in your organization. To justify an experiment you do not need unfounded assumptions, wild guesses disguised as certainties, false promises or expectations.
Instead the organization calculates how much money to allocate to experiments and then forms the experiments, but with the throughput ratio modified to consider information gained as the outcome benefit instead of revenue or service units.
22. If a process is not an experiment, and it does not have a justifiable throughput ratio, why are you doing it? It is a waste of resources, they do not directly cause an increase in revenues.
Final question.
23. Would your organization get a better throughput over expense ratio, a better return on its investment, more sales, more revenues, more profits if it re-prioritized parts of its internet operations, or are you satisfied?
In summary, despite the protests of those not accountable or noise you might hear, any alternative for your internet operations is simply a capital investment and is best compared to other alternatives using the "Throughput over expense ratio".