How to factor “hidden costs” into your CRM budget

17 Dec 2018

How do you work out how much your CRM is going to cost, and how do you account for hidden costs?  This may sound like a simple task, but the truth is often you cannot really calculate the full cost until you are well down the road towards implementation. For many businesses, this is a few steps too late.

By the time you have looked at assorted software, talked to a list of consultants, spent hours researching online, prepared your selection team and written your request for proposal (RFP), you would think that your idea of cost would be fairly accurate.  But if hidden costs are not accounted for, this can knock your budget right out of the water.

How big should your budget be?

Depending upon the size of your company and complexity of tasks, your CRM could cost from a few hundred pounds up to several million.  In the UK, the average budget is circa £3m, and project length averages at 17 months.

If you are not sure which way to pitch your budget, a good workaround is to select a low and high end.  You can then start off at the bottom and, as you add more and more detail, work up slowly.  You will need to complete this step before you approach the decision makers.

To keep your budget along the right track, I’ve listed three hidden costs that you should be on the lookout for when determining your expected CRM costs.

Three hidden costs to watch out for

Time: Time includes not only the project length, but the time that your selection team will invest.  This could be anything from a few days to several months or even years.  Internal costs can add up to very big numbers.  If your team is made up of 12 people and you are all going to working on the CRM project for 12 months, that is a lot of in-house time and money and too much to just be written off.

Consultancy: Whilst this can be a difficult figure to plot, it is one that cannot be thought of as insignificant. One rule of thumb is to calculate it as a multiple of the software cost with a good average being 3.5 times the price of the CRM technology that you are buying.

Cloud: Are you going to opt for cloud or on-premise? Implementation of a cloud-based system may be faster but not necessarily the cheapest.  Many businesses opt for cloud simply because it is becoming the norm nowadays, but it is worth taking a step back and considering what your business needs, as well as the variations between project time and delivery.

Don’t be fooled by putting down purely the ‘out of the box’ cost of the system. You need to consider the time taken and cost, then weigh up the two i.e. on-premise vs cloud-based:

  • On-premise:  This may start high as you are paying most of the money at the start, including installation and consultancy costs.  Consider the on-premise option to be very much front-loaded.
  • Cloud-based: Here you are not paying for a lot, to begin with, but costs may rise gradually after that (depending on your provider).  After about five years you may even find that the cloud-based system will cost more than the on-premise version.

So why do so many clients opt for the cloud?  Simply, it is faster, easier to install and upgrades are taken care of…plus you are able to access your system from anywhere.

Conclusion

Failing to set a realistic CRM budget is a big mistake, but then so is not accounting for any ‘hidden’ costs.  It is only by factoring these into your CRM budget that you can have your finger on the pulse of a realistic overall figure, rather than waiting for this to rear its head as the project moves forward.

Make all of the effort that you put into this worthwhile by being sure that the end result is going to be a tangible one.  Sending your RFP to vendors is a good starting point but don’t think that it is only the figures that come back that should be used as part of your budgeting process.  Accurate estimates just can’t be assessed unless detailed requirements are produced.  Vendors want your business so they will tend to come in on the lower side in order to keep competitors at bay. Whilst what they give you is a best case scenario, by taking into account hidden costs, you can come up with a ‘real case’ set of figures.

 

Guest Post - Discover CRM

Jane is a columnist for Discover CRM; as an MBA-qualified professional, Jane specializes in all kinds of copywriting and creative content production. With many years spent working in advertising and publishing, she is also skilled in editorial production and proofreading.

 

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