Selecting New Business Software #3: Set a Reasonable Budget

There are sites on the internet (like FindAccountingSoftware) that collect information from people looking for new software and feed it to people that provide software.
If you looked through the list of “projects,” you’d see a lot of them that want General Ledger, Accounts Payable, Accounts Receivable, Payroll, Inventory, Order Entry, Purchase Orders, Manufacturing, Service, and CRM. They want complete training and support. And the budget is $5000 for 5 users.
Or they’re looking for a new real estate management system with a budget of $2500 for the entire project.
Or a new inventory system for $500.
And these projects sit and sit and sit. No consultant or software provider volunteers to contact them. Why? Because it’s not possible to provide for their needs for the price they have set.
I’ve talked to the FindAccountingSoftware people about this. “We try to get them to set a realistic budget, but some are just convinced that they can get something for nothing.”
Several years ago, I got a call (for the second time) from a local business. The first time around, his budget had been $10,000. He was looking for hardware and software and implementation and data conversion. Ultimately he bought a system for twice this from a company that (from the looks of it) my have sold 25 copies of the software.
He got a deal.
Problem was, the software didn’t work. Inventory was wrong. You could run the same report twice and get different answers with the same questions. I know what you’re thinking…you must have put in the wrong dates or something the second time…nope…been around long enough to look for that. The same report gave different results.
So we did a needs analysis (see #2). Good step.
Then we talked about budget. This time, the business fellow figured he could go as high as $20,000 for 13 users.
“Sorry, I can’t help you,” I told him.
“We’ll find something,” said he.
“You did last time!” I reminded him.
Realistically, there are three basic ranges of software. Low, Middle, Tier 1. Some people put in another one, but I’ll stick with the three: S, M, L.
Tier 1 (L) packages are going to cost in the range of $500,000 to a heck of a lot more than that for businesses the size that need them. And the implementation will probably cost at least twice that.
(Ok, the Tier 1 vendors can point to some exceptions on the low end, deals where the software cost $100,000 or $150,000, and where the implementation was $50,000. But for the average business, you wouldn’t be looking in this range of software if you didn’t need about 50 or so users on the low side, and that’s going to cost you).
Figure $5,000 per user in this range, at least. And twice that to four times that for implementation.
Next I’ll take the low end (L). That’s where QuickBooks lives. And Peachtree. Figure about $700 on the high side per user. And the software’s so simple that you probably won’t need much help figuring the software out. You may need some help with the accounting concepts, though. That’s where an accountant or CPA comes in.
And now for where most people live. Usually around 5-10 users, companies figure out that QuickBooks or Peachtree or custom software or Excel or ACCESS aren’t working any more. They start looking for software for their businesses. And they have two basic choices: off-the-shelf, general market software (what I call the “Top 10 Mid-Market Packages.” Even though at any given time there may be 8 or 25 of these packages, I still call them the top 10) and vertical software.
And since discussing the differences will take a while, and this entry’s long already, I’ll stop here with the note that these packages are going to run in the range of $3000 (basic model Chevrolet) to $10,000 (limo) per user. The difference is the features you need and how many users you need. The fewer features, the less the investment. The more users, the less the investment per user.
And–lest you start thinking this–you can’t often just “give up features” to lower the cost per user. Most businesses that need inventory or a web store find that the cost per user is rising and they can’t find much of a way to push it down.
More later.