One of the biggest difficulties that consultants going down-market have is getting the price for their services in the right ballpark for small- and medium-sized businesses.
Speaking from the perspective of an ERP vendor, we often come across prospective clients who have misleading expectations for the price of ERP set by a consultant who didn’t understand the lower end of the market.
One of our partners was telling me recently of a financial controller at an 18-person job shop that he met who was resistant to the idea of ERP. After some digging, it turned out that the company had previously engaged a consultant who quoted $900,000 for an ERP system.
You don’t need to be in mid-market ERP for very long to know that anything approaching a million dollars for a small manufacturer is not going to pass.
And so this company chose to stick with using a basic accounting package and a bunch of spreadsheets, based on the advice of a consultant who didn’t understand ERP at the bottom end of the market.
We fixed that by the way, but it is a common occurrence.
What had happened was that the consultant took his experience implementing ERP systems for clients with already highly-refined processes and applied it to a business whose processes had not yet been refined. They are completely different situations and need to be treated differently.
Targeting your pricing at the wrong level hurts everyone involved. You lose business; and your clients end up stuck using inefficient and outdated processes built around ad-hoc or outdated tools.
In my last post on ERP consultants going down-market, I talked about the balance between focus and details. In particular, I mentioned that, as you go down-market, focus becomes increasingly important. It is in that balance between focus and details where getting the right pricing for ERP projects lies. SYSPRO recognizes that you have to tailor services to the maturity of the organization.
You can’t inundate small clients with technical details and you shouldn’t try and make their business processes perfect. In the words of athlete Kim Collins “Strive for continuous improvement, instead of perfection.” Focus on helping them find an ERP solution that delivers a rapid return on their investment while being able to grow with them.
The processes at most mid-market companies are not highly refined, so their ERP implementations don’t require a lot of re-engineering to preserve their processes. It is more likely that their processes are ad hoc and just getting them set up with an out of the box ERP implementation will improve their processes.
Maybe, over the lifetime of the client, they will spend in the millions on ERP, but deliver value first, give them some time to see that value, and then slowly work with them to refine their business processes and ERP implementation.