Is your small business ready for an ERP?

ERP systems are typically defined by several business tiers associated with revenue scale. Each discrete segment represents various feature sets driven by individual business value propositions.

We’re not discussing selling price here - businesses should be capable of understanding their own budgetary limitations. However, system pricing can still help businesses identify feasible ERP solutions, especially in smaller companies.

Let’s first consider the overall market’s ERP tier structure; then we’ll orient ourselves to small business as a specific business type.

Today’s ERP tiers

The ERP market is largely defined by three revenue levels including:

• Tier I ERP vendors: these sell to the (large-scale) market with annual revenues exceeding $1 billion. These companies are invariably multinationals with a presence in many different geographic regions. 
• Tier II vendors provide ERP to mid-sized companies in the range of $50 million to $1 billion in revenue. Tier II vendors are specifically designed to deal with this market scale, while also catering to single or multiple deployment locations.
• Tier III ERP solutions target companies that typically generate revenues of $10 million to $50 million. These solutions are simpler to implement and support, and offer correspondingly lower cost of ownership.

Small enterprise suitability for ERP

While tiers I and II continue to represent the bread and butter of today’s ERP market; of late, tier III has become a hotbed of innovation. In the main, this assertion can be best understood by following the cloud’s emergence as a central ERP business driver.

Find the right system for your SMB with this step-by-step guide to selecting ERP for small businesses

In short the cloud offers ‘big company’ information flexibilities, at a ‘small company’ cost.

Together, this closed-loop value can create an entirely new advantage, where small companies are able to generate nearly as much revenue power as big ones, while also establishing better cash positions over time.

So to get from here to there, what kinds of small companies offer the most clear-cut ERP purchase opportunities?

What sort of small businesses should be looking at ERP?

While the word ‘best’ implies a degree of subjectivity, whenever ERP systems come to the fore, some business types accommodate resources-based technology better than others. Some examples of small businesses that work well with ERP include:

Small, high-growth companies

It’s only possible to survive off of spreadsheets and Quickbooks for so long. Eventually, lack of more advanced financial management and process automation tools will stymie growth in revenue. Avoid this plateau in growth by implementing an ERP sooner rather than later.

High-growth manufacturers and distributors in particular will find benefit in ERP due to the large amount of data they deal with - inventory, production orders, sales, supplier orders and supply chain management are just a few of the siloes that ERP can eradicate.

More specifically, cloud ERP may be a good fit for:

Companies that can’t afford a large upfront investment

While eventually SaaS subscription payments will level out with upfront license fees (more on that below), the lack upfront payment provides an opportunity for smaller companies without large sums of capital lying about to take advantage of ERP’s benefits.