ERP selection process steps for small businesses

May 1, 2016by scv

Selecting an ERP for a small business is exactly the same as selecting an ERP for any larger business.  Carefully list all your requirements. Gain consensus among your organization’s leaders. Rank the requirements.  Identify the ERP that best meets all the “must have” requirements on your list.

The problem is that small businesses are not the same as medium or larger businesses so the ERP selection process must match.

Break down work currently done

It is a small business meaning few people are responsible for several jobs.  Make a list of those tasks. Who does each task? What is the frequency of the task?  How much time is required? You are beginning here to make a list of requirements for an ERP.  For each task, start adding what problems are related to that task. What makes it more difficult than it should be?  Are there problems passing work from one task to related downstream tasks? If the task is a decision, what support is desirable to make an optimum choice?  What improvement in tools or user interface would make the task easier?

Examine work not done

Time is precious and there likely are tasks that should be accomplished that never are completed or are done too infrequently.  These could be simple ones such as reconciling the bank accounts. How many months has it really been? Remember that form from some government agency asking about some compliance issues?  Is it still at the bottom of your in-basket? Think about work not done as possible ERP requirements.

Who will manage an ERP?

This is important.  You have few resources now and those same employees and consultants on board today will need to manage your ERP.  Do you have the network infrastructure today to employ any ERP? Is there someone who can perform system backups and other server maintenance?  ERP will be another set of software to be monitored for potential problems, required training, and updates from the developers.

These questions could lead to a requirement that the new ERP be SaaS or employed in the cloud.  Most ERP providers offer either cloud or on-premises ERP. It also is possible to manage an on-premises system in your own cloud from Amazon or another private cloud.  Using a cloud ERPsimplifies some of the requirements but they still require someone to monitor the systems. There will be questions from users on how to accomplish some infrequent work.  There will be database problems to be resolved and many of these will require assistance from the ERP provider as the cloud data is (rightly) protected.

Find an ERP vendor comfortable with a small business

Small businesses are different from large ones.  You know that and even though you dream of becoming as large as Apple or General Motors one day, you are not yet there.  The reseller or developer you will do business with implementing an ERP must be comfortable working with a business like yours.  If they have a list of tasks for you to pass out among your staff, they do not understand your staff is only you and some of that work will need to wait a few more days.

Remember that if your plans will take you to become a large multi-national status in the future, your provider should be able to help guide you through choices today that will allow you to develop in the way your dreams point to.  Limiting yourself to a provider whose primary advantage is small businesses might be too great a limit.

You like the QuickBooks model for accounting

Your business started with QuickBooks and mostly it has been more than adequate.  There are some surprisingly large businesses that run quite well with a simple financial system.  Yours could become one of them. Now is the time to look forward and decide if a more sophisticated financial system should be a requirement for your ERP.  What might your compliance requirements be in the future? Do you plan to issue stock and possibly conduct an IPO? What requirements might your investors require of you?  These are not simple questions. Changing to a different accounting system could require accounting resources you do not have and cannot afford today. Nevertheless, at this time, you want to include financial and accounting requirements that affect your ERP requirements.

The choice of ERP is yours

As you consider ERP systems and evaluate your ERP requirements, you will find consultants and salespeople who offer to assist you in your decision.  Assistance can be beneficial but remain cautious. Some assistance can lead to a hidden path toward an ERP someone wants to sell that might not be optimal.  Other assistance might be benign but could lead toward the wrong path simply because the other person does not embody your dream for the future.

You might not think you have the expertise to make the best ERP selectionand that can be true.  Read, study, meditate, or do what is necessary to enhance the expertise you have. The ERP you select or allow to be selected for you will be yours for a long time, probably a decade or more.  If your choice today turns out to be suboptimal, you can change your mind later. However, do whatever is needed to make the best selection choice possible today.

Fewer people

In a larger organization, there are many people coming from a variety of disciplines who can meet several times to hammer out an excellent list of requirements.  They have expertise in production, engineering, finance, marketing, legal, system design, and the whole range of disciplines. A small business might only have a dozen total people with advanced expertise in one or two disciplines.

An incomplete list of requirements might be worse than no list.  That (very) small team from the small business must list the requirements they can.  Then they should refer to other resources such as college texts and the internet to supplement the requirements for which they have expertise.  In many cases, they will get outside help from a consultant to help solidify their requirements. Be cautious when hiring a consultant from an ERP provider as you want a list of requirements for the business and not a list of requirements that their ERP software can provide.


The owner of the small business is likely one of the few people working on the requirement list.  Whether the business is a corporation or a sole proprietorship, that owner will always have an outsized role in ERP selection.  That does not imply the owner truly understands what all the requirements should be.

Who else is an owner?  Many small businesses are family-owned.  The person who comes to work every day and sits on the ERP selection team might not be the only voice.  Is there a sister whom you met once who, in fact, is the decision maker? Is the ERP selection really going to be made over the weekend while visiting Mom?  Good or bad, this often is the way of life in a small family business. Make every effort to hear from all the voices in your small business.

The future

Any ERP selection is a long-term event.  ERP systems often will be used for a decade or longer.  Because a business is small, any change planned can have significant effects.  Think about the ERP requirements for your business ten years from now. Be as precise as possible, understanding your business ten years out might be in a considerably different industry, whether intentional or not.

Because the business might be changing, there can be ERP requirements that are transitional.  What requirement might be present in five years that could be gone in ten years? What requirement could exist only because the business is changing?

Now what?

Your requirement list is complete.  You have it prioritized and you know which requirements are mandatory for your ERP.  You also have a secondary list of desirable features you would like to have but are not quite requirements.

Use your network of associates, the internet, and other sources, such as trade publications, and develop a list of possible ERP vendors whose products seem to match your requirements.  Contact them and make an inquiry. As a small business, a formal request for information (RFI) might be too much.

Some of those possible ERP vendors will exclude themselves from your selection list.  They simply will not reply and whether they do not think they can help or they never got around to a reply, there will be others to work with.

Narrow the replies down to a few whom you will invite to provide demonstrations.  Be sure to manage the demonstrations. They will have standard demos they perform regularly but you want to be certain they address all your requirements and not waste time on features that are not included in your requirements.  Develop an objective measurement system such as a numerical score sheet to evaluate the demonstrations.

If all goes well, you will find what appears to be a winner.  Get a formal proposal. Look at the price, certainly. You want to determine your total cost of ownership for this ERP.  What does the system cost today and what costs will be coming due in the future for maintenance and support? How will your users be trained and what will that cost?

You already estimated the value of your expected benefits so balance them against the estimated costs and check that your return on investment is satisfactory.  Now, close your eyes, click your heels, bite the bullet, or do what you need to make the hard choice. You will soon have the ERP you need.

ERP focus

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