June 11, 2015

How to Justify Investing in a CRM for your Small Business

For some business owners, there seems to be a recurrent challenge in understanding how to justify investing in a CRM for their small business. Is it a sound investment? How much is too much? How can you quantify profitability with a CRM? Because it’s not a purchase you can touch or feel, identifying your ROI requires a little more insight. 

What is a CRM system?

A CRM system is a database that includes every person your business comes into contact with: suppliers, customers, potential customers, vendors, partners, and more. Everything goes into the CRM system: emails, appointments, notes, tasks, communications and actions. It can even integrate with your accounting system so that everything is connected in real time. When someone in your company gets a phone call, it should be the first place they go to in order to access the client’s history and identify potential threats and opportunities. A CRM system will track these issues and opportunities with both potential and existing clients.

How do you Quantify the Value of a CRM for Small Business?

The first step in quantifying your ROI with a CRM for small business is to add up the raw costs of your CRM over a length of 5 years.

The second step is to look back over the past 5 years. Your CRM will allow for many new capabilities you’ve never had before, at a fraction of the time it would usually take you without a system. Did the lack of such capabilities and resources result in lost profits?

You will need to compare your investment to these accumulated losses! This is how you do it:

Lost opportunities

If you looked back 5 years and consult your salespeople, calendars, and spreadsheets, you may notice some opportunities that fell through the cracks. A number of deals, projects, quotes, and bids were most likely lost due to lack of timing, organization, communication, negotiation, and even forgetfulness. 

Could these missed opportunities have been avoided if you had had more resources?

Lost clients

What about customer retention? Have you lost any customers over the years due to a lack of premium service, an abnormal response time, or aggressive competition? Did you give these customers the time and attention they deserved?

Lost revenue streams

Let’s not forget about your existing clients. Have you truly maximized your revenue streams and are there more services your clients could benefit from? Your existing clients might be looking for a solution and not even know that you’re able to provide them with it. Are you losing these revenue streams to other competitors when they’re right within your reach?

Justifying your CRM investment

Now add up the value of these losses and calculate your profit margin. Compare that dollar figure to your investment in a CRM system. How does it compare?

The challenge that most people face is that they aren’t equipped to “see” the lost opportunities, forgotten quotes, or underserved clients. So much is happening in your business that all these factors get lost in translation. A CRM system gives you the resources to insure nothing slips through the cracks.

You might not be able to touch, feel, and see your CRM system’s ROI like you would with a new piece of equipment, but make no mistake, it’s the key for maximizing your business’ profits.