3 warning signs your potential ERP vendor is in financial trouble
Know your ERP vendors as well as possible before signing on the dotted line. Warning signs are always present if you carefully look for them. Some say ERP stands for Early Retirement Probably – is that in your future?
Has there been a recent change in the vendor’s business? Maybe they were recently bought out by another business. The press releases talked about synergy and how both businesses would thrive. Some takeovers really are about buying customers and the ERP you are considering might be going away. Did you see in the news that your vendor recently appointed a new CEO? New people at the top will have their own ideas of where the business should move. Their board of directors appointed that CEO and approves of the new direction. Is your business as their client in that new path?
References and social media
Ask for references. Contact those references and have a meaningful conversation. You want technical details and hope the references’ implementations were successful. Now ask how well they got to know the ERP provider’s business, people, and what they now think of that organization. Their implementation could have been perfect and a normal reference would show satisfaction. Rumors they heard during that time might cast a cloud over your prospects.
Now, look at the vendor in social media. Are there negative comments on Facebook? How do you feel about these? Are they useful indicators or the bad feelings of a single person whose job disappeared after the implementation?
Check LinkedIn. Do you see many people recently leaving the vendor? Where did they go and can you tell why? Connect with a former consultant and get their opinion. Maybe you see a lot of new hiring there. Does their growth mean they might not have time to support your ERP efforts well? Will all those new people have the skills and experience you expect?
Ask for copies of recent balance sheets, income statements, and cash flow statements. There should be no problem getting these even if the vendor is not publicly traded. Put your accountant to work analyzing the statements. Use your outside CPA if necessary. Your business will depend on their business for years to come. Will they be around to support you? When you find red flags, ask the vendor for explanations. The vendor should know about these flags and hopefully has already addressed them. Look for additional data in stock markets and industry journals. You will find mentions of your vendor and any of these could be a warning sign.
Once your signature is on the contract, the burden of renegotiating becomes much more difficult. If there are warnings, find them and heed them.
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