10 tips for selecting an ERP system for your small business
Read time: 4 minutes
What they didn’t know was that the task would turn into a major headache for their company, Leeza Distribution.
The Montreal company, which distributes branded surfacing material such as floor tile and quartz-based countertops, ended up spending five times more than what they had budgeted on the ERP software.
What’s worse, the system turned out to be poorly suited to the company’s needs and was still causing frustration five years later.
Need for more investment
McDonald’s experience is common when entrepreneurs go shopping for new technology systems. These disappointing experiences could explain, at least in part, why many Canadian companies don’t invest enough in technology.
Once burned, many entrepreneurs hold off on needed hardware or software investments and end up depriving themselves of the systems they need to compete.
With a little planning, a purchase of an ERP system can do much more than just satisfy basic business needs. It can become a vital tool for enhancing competitiveness, reducing employee stress and boosting profits.
The secret is to follow a detailed purchase plan that is aligned with your company’s strategy.
10 steps for making the right purchase
To avoid pitfalls of all kinds, here are 10 steps for purchasing the right ERP system or other technology for your business.
- Draw up a strategic plan for your business, including a vision for the future and an action plan for achieving it. This will help you understand what your technology needs are and how much money you can invest to meet them.
- Make an inventory of your existing technology. Then, list the problems with your current systems and opportunities for improvement. It’s quite possible your existing systems can be reconfigured or upgraded to meet your needs.
- Create a thorough list of requirements for new systems. This “needs assessment” should be based on your strategic plan. Give each requirement a weight based on its importance within the strategic plan. Be sure to include implementation elements, including employee training and re-engineering your business processes if necessary. Seek the help of an outside consultant as needed.
- Assess potential costs and determine the financial and human resources available to meet them.
- Send prospective vendors a request for proposals based on your needs assessment. Be sure to consider smaller vendors—not just the major players.
- Score how well vendors meet each requirement, and determine the total cost of ownership of each proposal including costs for licensing, professional services and maintenance.
- Invite your top picks to present their product. Provide them with “a demo script” covering the specific requirements that you want them to address during their presentation.
- Involve employees throughout the process to ensure their needs are met and that they take ownership of the new system.
- With the help of your employees, develop an “action plan” for implementing the system.
- Monitor implementation and impacts.
Taking a systematic approach
When McDonald decided to update his ERP system, he opted to take a more systematic approach than he had the first time around. He quickly realized he needed outside help for the job.
He called BDC and retained a consultant who did an in-depth needs assessment for the business. Built around the company’s strategic plan, the result was a highly detailed request for proposals that listed nearly 1,000 requirements.
The top four vendors were each invited to do a half-day presentation focused specifically on Leeza’s needs, making them easy to compare. “We were comparing apples with apples, not apples with pomegranates,” McDonald says.
The top two picks were then each brought back for a full-day presentation, followed by an additional half-day each to answer follow-up questions.
The final choice was about as well researched as it could be, McDonald says, and the new system is a cornerstone of the company’s ambitious growth plans.