Do you even need a CRM in the first place? Here is how to figure out.

When companies first begin, they typically manage their customer information with spreadsheets. After all, it’s easy to set up, simple to use and free.

As they grow, many begin to wonder if they should invest in a Customer Relationship Management software (CRM) to manage the interactions and relationships between a company and her customers - past, current and prospective.

When starting this journey, businesses tend to start with approaching vendors directly with questions such as: "Can you show me a demo with the features you have? I want to see if it can meet my requirements."

Is this really the best way to begin?

Salesforce research on businesseses has shown that one of the top the biggest constraints on business activities is time.

Is it a productive use of your time to spend valuable business hours going through different demos of the various solutions and trying to wrap your head around all the features, only to find out that the extent of your problem doesn't justify the investment?

Rather than jumping into functions & features, businesses need to answer "Do I even need a CRM solution in the first place?"

In this article, I will explain how to evaluate if it is even worth spending time on a demo in the first place.

1. What is your overall business goal?

For a CRM project to be successful, it needs to align to a broader strategic business goal.

This is essential to the success of your project. According to Forrester, “Disappointment with CRM usually stems from poorly conceived strategies that lack a laser focus on improving a specific set of business capabilities to increase revenues or reduce costs,”

Ask yourself, what is your overall goal in the next few years?

Is there a specific % you're aiming to grow your business by this year? Why is this important? Are you aiming for a Series B Funding; to be acquired; have investors who have set ambitious targets for you or organisations funding you which have given you a mandate?

What if you're not aiming for any major growth and you're just hoping to retire in the next three years to play with your grandchildren?

There is no right or wrong answer about what your business goals are. The reason for understanding this is to evaluate - Is investing time and money into evaluating and implementing a CRM really necessary? How is it going to align with what you want to achieve?

2. What are the implications of your problems to your overall business goals?

Once you've identified the business goals you're looking to achieve, it is important to evaluate is the issues you are facing affect this broader goal.

It is common for businesses looking for a CRM to share issues they face such as not having a single view of your customer and their historical communication with you. Yes, everyone wants a single view of the customer but how much do you really need it?

What is the true cost to your business of not having a single view? For instance, you believe it could cause you to lose clients to competitors and lead to a loss of revenue.

If after doing a simple calculation, you realize that it does not impact your business goals much and perhaps only costs your business $100 per year, then perhaps your problem could simply be cosmetic. In that case, you would not even need a CRM solution in the first place. The problem probably costs you much less than your company's entire year supply of toilet rolls.

3. Why now?

Once you've established the impact of your problem, it is important to understand is it really important for you spend precious business hours evaluating this solution now?

What if you decide to delay this project by 3 months?

In the above example, it is clear. Overall, the problems faced by them caused them $707k per annum. This is around $58,916 worth of business cost and opportunity costs for every month they choose to delay. If they delay by three months, they lose $176,749.

Other than establishing the costs, it is important to understand the reasons for acting now. After all, you have million dollar businesses built on the spreadsheet CRM alone. Your business has been surviving so far all along. Do you truly need to have a change this year?

4. What is the ROI?

Say you figure out that this is the right solution for you, the next step is to calculate the ROI of investing in it.

Assuming that rather than hiring an additional headcount, you're looking for a lead nurturing and scoring solution to ensure the leads acquired do not go to waste. The solution also comes with email templates built in so you do not need anyone to design them from scratch. This solution would cost you $35k per annum.

At face value, it may be expensive to some. However, if you do the math, it may make financial sense.

Say, it costs you $4,000 a month for a digital marketing specialist with 2 years of experience. If we include employer CPF, that is $4,680. If you take into account employee loading costs such as annual leave, sick leave, public holidays, down time, it cost, training and insurance, it goes up to $6,084. In a year, that is $73,008

Which would be the more expensive option? In the example above, you save around $38,008 per annum! This is excluding the potential gains which comes from being able to maximize every dollar spent on marketing and targeting prospects who are ready to buy.

You have to ask yourself, with a lead nurturing program in place, how many more leads do you think they can get? How does that translate to a % increase in revenue for your business?

5. Does this solution meet my requirements now?

As above, the first four questions were designed to help you understand if you truly needed a CRM in the first place.

Once you've established that, it is time to dive deeper into your requirements. The mistake that many businesses make is looking at short term requirements

What is your expectation for your business in the next 3-5 years? What if you need to scale and have new requirements? What are your options?

For instance, you may be a school looking at driving more recruitment through having a CRM.

What if one year from now, you start a new course and receive so many leads that you need a solution to nurture these leads?

What if you are looking to build community portals for students to find jobs, push new types of classes to them and to facilitate their payment of school fees?

What if your student intake increases in the next 3 years and you need a system to setup and schedule classes and sessions, student allocation, student assessments and attendance tracking, etc?

Is having multiple disparate systems that do not talk to each other the best way forward?

I hope that this article gives you better clarity on the factors to consider and think about when evaluating if you need a CRM solution or not.

Many sales people would be eager to do a demo and send you a proposal. However, before jumping into that, think about the why.

Remember, as a business, your time and your employees' time are scarce. This is especially true for SMEs. Do you really want it to be spent on watching a demo and evaluating a solution without understanding the why behind all these time and effort spent?

Should there be any questions about this piece, please feel free to reach out.

The views here are my own and may not reflect that of any organization I am part of