When Do You Actually Need an ERP? (It's Not Revenue)

Peter Nicholson (00:24)
And welcome back to the ABCs of ERP and Beyond, the podcast all about ERP systems and how they shape the way businesses operate, grow, and succeed in today's world. I'm Peter Nicholson and joined as always by Nirav Shah and Emily Browning. And today's episode starts with a post that I stumbled across on a Reddit the other day, and it's from a real small business owner.

And I'm gonna read it out. It says, I'm running a small but growing operation and lately feeling the limits of our current patchwork of tools, spreadsheets, and SAAS apps. I keep hearing about ERP systems being a game changer once you hit a certain size, but I'm not sure what that line actually is. So I would imagine that our that post is probably.

Maybe half of our audience. and we thought that that would make a good episode to go through. hopefully we can kill some myths straight away with some of the stories that I'm sure Narav is gonna share with us today. So we have no top fives, we know have we have no checklists today. this is purely a view from what that kind of jump looks like. What pushes people, what pushes company to make the switch from

spreadsheets and SAAS apps to a single system such as an ERP and is it as scary as it sounds and really can we define where that line actually is? So let's get into it. Hello and welcome both of you.

Emily Browning (01:55)
Hello again.

Nirav Shah (01:55)
Hello.

Peter Nicholson (01:56)
So I stumbled on this Reddit post. I thought, you know what? This is a good point. We've always talked about how you choose the right ERP. We've spoken about how you set up a good team, top five do's and don'ts of ERP implementation, data migration, testing. We've we've had some demos. We've never actually said, well, how do I how do I know that I want an ERP? Well, what's my business need to look like?

when I'm like, you know, you've got guys, wow, we really need to move on to an ERP. So I think this is a good post to to to discuss. And qu surprisingly it was posted maybe a couple of months ago now in the ERP subreddit. and most posts in there always get some kind of reply from someone. This one unanswered. So I can't imagine that it's that no one saw it, because you know it's a it's a well attended subreddit.

I think people may not know how to answer it because it's one of those things where it's not black and white, is it? It's not like you can go, right, this is it. This is when I need one. It's got kind of that grey area that's gonna be quite different for each business. So I think this will be good if we can see if we can answer this. maybe the who knows, the post, the original poster might be knowing about our podcast, but there's we can certainly guarantee there's I should yeah I absolutely should, yeah. It's still open.

Emily Browning (03:10)
Well, post the link. Let them know when it's done, when it's out.

Nirav Shah (03:13)
Yeah.

Peter Nicholson (03:16)
but we can certainly say there will be listeners out there that might be asking the same question.

Emily Browning (03:21)
Well, and I commend you for going with the flow of finding us a nice topic on Reddit. Well done.

Nirav Shah (03:26)
Yeah, absolutely.

Yeah, I think, you know, this comes up time and time again. This is like the age-old question. Even before probably ERP was even built, right? For an actual use case or purpose. the signals are everywhere in small business. But it I think the first signal is frustration. Like pure deep down just frustration, almost like hell going through and like.

I just can't be doing what I'm doing right now to keep running my business. And a small business is the owner. And it's maybe a team of like four people, five people, right? Hell, say 10 people. But it's literally to the point where the frustration is so high that they cannot, you know, mentally or emotionally proceed with the way they're going right now without.

you know, failing or people quitting or you know, you just feel a high level of burnout, right? And that I feel like is a sure s telt sign that you're just in a bad spot. You know, you you're you're gonna as an owner, I've talked to a bunch of owners, especially, you know, we sell ERP, they actually almost feel that the burnout is so real that they almost like, you we should we just close the doors. Like

What we the reason why we went into business is to maybe create a good work-life balance, right? To have time, right? Something that you can't really buy, to build something that's special, to help take care of the community, help take care of your employees. But the owner is running so hard, putting in 80, 90, 100 hour weeks that he that the that end decision is just like, if this doesn't get better, we're just, I'm just gonna close the doors because this is not what I signed up for, right?

and that's really the real deal here. when a small business says that we are ready for ERP and you just have a small mom and pop shop, that's the fear, that's the that's the frustration level. Versus you start going up the revenue a little bit chain, and you get, you know, somebody that's in the $20 million range, $30 million range. Now that has a different set of signals potentially, right? It could be a new executive team member, it could be

Peter Nicholson (05:25)
Mm-hmm.

Nirav Shah (05:39)
that there's the owner is talking to other people. it could be that you know there's a group inside the company that's willing to take on this project because they see it better, but the owner doesn't have much quote unquote involvement in it, right? Because he is maybe busy doing sales, he's busy doing something else. Owners generally aren't the key users here. Okay.

They are the key decision maker. And we have to really understand that piece of it, right? So if you're an owner out there that's feeling this pain, you gotta kinda tell yourself you're gonna do this project because you wanna take yourself out of the day-to-day detail. You wanna create standard SOPs so people could do the job and responsibilities and functions that maybe you're doing as an owner, you know, 10 or 12 hours a day, and you know that there's a better way. So

remove yourself from the equation saying you're not doing it. You want to you want a good system where your team could just manage it so then you can manage your business at the end of the day. Right. You could hire the right folks. You could get those additional contracts. You could, you know, run you know, network with whoever you need to network, right? Just excel in your industry versus being in the day to day minutiae and you're just getting burnt out and and frustrated.

Emily Browning (06:52)
So I have a question. It's a great point about the owner being burnt out, but I could also see one of their options being, oh, I'll just, oh, I need to hire more people because I'm doing all of this stuff. I'm working a 12 hour day. I need to bring someone in and they can do three hours of my work and then go out and get us some more sales. So what's the...

difference between that being a solution versus actually we need a system. What does, what's the difference in the burnout, I guess? I need a system versus I just need another body.

Nirav Shah (07:22)
Yeah, I I look at it, you know, whether it's a body or it's a system, that process is not going to change if you're not looking for a more efficient system, right? If if you're gonna get somebody else to do what you're doing, that person's gonna get burnt out. If that person leaves, who's ended up doing that same work is gonna be you at the end of the day, right? You need to be able to create systems that are turnkey. So you have a set of processes that you run and you know, integrated system.

So if that person leaves, you have procedures in place where you could just hire and give those procedures to somebody, not the retrain, relearning, right? All the manual steps that was happening all the time. So because that just never dies. That continues, continues, continues. And then you end up being the owner ends up being the person that has to keep being the gatekeeper of that versus not being the gatekeeper. So I don't know, you know, I I I don't know if that's like more or less when I talk to customers and they and they're looking for an ERP system.

Peter Nicholson (07:51)
Okay.

Emily Browning (08:08)
Mm-hmm.

Nirav Shah (08:17)
I don't think hiring solves that problem. I think sometimes hiring can make that problem even worse. because they could then be looking at data a different way than the owner was and cause some conflicts and you know, things like that. And instead of the owner taking ownership, saying that what I'm doing is not sustainable for anybody, let me make sure that what we're gonna put into place is gonna be turnkey enough.

for the next person that we bring on. so I don't have to do it, right? Look long term. Look long term. Don't look short term and and and think that that's how you're gonna you're gonna win this battle with with you know kind of a limiting you know limited set of processes.

Peter Nicholson (08:55)
think listening to how you were explaining that I think it sounds like there is a period of transition between something being annoying to a genuine business risk. So when I think about not having an ERP, having to do double entry, triple entry, I'm able to put it into this spreadsheet, then I have to go to this supply portal and then I have to do this. That's just annoying, right? And there's a level of which you can kind of handle that. And there's a level

Nirav Shah (09:24)
Right.

Peter Nicholson (09:24)
Which you can't. And then the first

Nirav Shah (09:26)
Right.

Peter Nicholson (09:26)
thing as a business owner would be, you know what? I can't be dealing with all of this crap. I need to also be out there selling. I'm gonna just get a someone in to deal with this crap. So the annoyance has gone. Yes, it's been passed on to someone else, they're gonna potentially get annoyed and burn out. But then that conversation, as you were discussing that, you the point changed because then it turns into, well, what if that person leaves? If that person is now doing that, I go out.

Get a load more business. We now have more revenue, more customers, more double entry to do than that other person I've just hired quits.

That's now business risk because now it's not like you can go back, I'll just go back to doing it, because now there's just too much to do. So it was interesting to hear your thoughts there, that it changed from this is annoying, this is burnout, now we actually have a risk when someone leaves and takes all of that tribal knowledge, and now we haven't got time to train up a replacement.

now you can't actually recognize revenue. So I think there there must be a point at which you can be able to say, I need an ERP because it that would take risk out of my business rather than I need an ERP just because I can't be bothered filling in a couple of manual spreadsheets.

Nirav Shah (10:42)
Yeah, ex exactly. And you know, from my experience, it's across the board, right? It's all about how do you minimize how is the ERP gonna minimize your operational risk? can you capture your data? Does it fill holes? Does it fill blind spots that you have? And the blind spot by the way, is just not that hey re

We're our the way we're reporting revenue or the timing of that reporting of that revenue is not real time, right? That's a kind of a blind spot. Or, you know, we have to go back and look at all the our orders for that month and then book a revenue number. That's a blind spot, but that doesn't have to be a process blind spot. The blind spot could be the person doing it, like doing a specific thing that they just can't get to all that work that they have to do day in and day out, right? So,

Filling the blind spot, filling the gaps, making process easier. you know, working as a team is what it comes down to. Because if everyone's working in their own silos, you're not working in a team. You're working, you know, independently, which quote unquote you do anyways, but that data is not visible to other people. It's not, you know, visible to other departments.

So you're working silo and then you're bringing that data to a meeting on a weekly basis. Now, that might not be enough time to prepare, right, for the next four or five days, because maybe you only meet once a week, right? And then everybody goes off and works in their own silo. So the decision-making process slows down considerably when you're on all these separate types of systems. Everyone is managing their own corner on their own, if you will. And it gets to a point where

You know, the owner saying, I'm just losing control. I'm pulling my hair out. I'm losing control. I don't know where we are as a business. You know, we need an ERP system. All right. And that's really when it comes to small businesses, is where, you know, we feel that I I see a lot of frustrations right away. I, you know, I I'll give you a funny, funny story here. We had a customer that was so fed up with their own processes, it was limiting their hiring because they couldn't even find people.

ready to work because during the interview process it became very apparent to those employees that they were very un disorganized, that that employee maybe set up for to failure. because they they they couldn't measure their businesses correctly. So they were having a hard time hiring until they had better systems in place. Right. and people are smarter now, right? They know what's you know what is gonna what means success for them and they don't want to be

band aiding or putting putting scotch tape on things when they don't need to, right? So if you invest in software and your emp people that you're look are hiring are kind of that caliber, that have come from that software environment that understands how critical software is to be successful, you're gonna attract that talent too at the end of the day.

Emily Browning (13:34)
I'd be interested to talk a little bit more about what those silos look like. Because on one hand, when you say it, I'm imagining, you know, some people are working in some different Excel sheets. The, you know, the warehouse has stacks of paper in an in-tray and an out-tray. But I doubt it's always quite as in the dark ages as that, especially with lots of, you know, free software is available now solutions. You could end up with, you know, a bunch of different software is going on. So you don't necessarily feel like you're

What's the word stuck in the past whatever so what what could what what could those silos look like?

Nirav Shah (14:03)
Yeah.

Yeah. You know, like an ERP system, I'll start there because it's an important point. An ERP system is strong in inventory management. It's strong in accounting, right? It's strong in connecting, you know, sales to planning and purchasing, receiving, like keeping all that in one place. But these small businesses, they get bought into and it's it's not wrong either, right? It's

It's kind of how things are marketed nowadays. They get into purpose-built systems. So, meaning they'll buy, right? Obviously, Shopify, it's e-commerce, sure. You know, that's your that's your storefront. You're going work on that. Then they'll buy ShipStation that's, you know, purpose-built, just for shipping and only shipping, right? Then they'll go out and buy, they have QuickBooks for accounting, right? Now you have counting that's purpose-built for accounting, right? Doesn't really handle Shopify orders very well.

By any means, right? But there's a connection between Shopify and ShipStation, but that's kind of loose. And then they realize, you know, our inventory is getting all jacked up, right? So they buy fishbowl or they buy another inventory purpose solution, but not everybody uses it because they don't buy all the licenses. Maybe just a manager uses it because he needs to go ahead and integrate maybe some some of the financials into QuickBooks. But the receiving of that inventory is just done on Google Docs. That's completely separate. It's not even in

fishbowl, right? So you could see how that starts adding up. So what just you just need one person in a department to raise their hand and say, hey, there's a gap in my process, but I've been researching, I found this tool that would be really good for my department. The value is that for only for that department, there's no value of it like how it's going to spread across the business. That's all manual, how you have to do all that double work and put all that information and backfill all these other extra systems that you're using now to get to what an ERP does natively out of a box.

Right. And it does it very well. So that's the trouble I feel like small businesses as they're growing, they get into because there's a bunch of purpose built solutions out there. And they just think that they could just start picking and popping it into their processes, and magically they're gonna connect. They don't, right? and then you get to a point you're gonna I keep coming back to this is that that owner is now frustrated because he has to log into four or five different systems.

Pull reports from those systems to make d a difference between what's heads and tails of my business right now. Right. And then he goes around saying, What does an ERP system do for me? Right. And that's when we get the call. And then we start talking him through this, probably like, hey, you got yourself because of this situation. Here are these five software solutions you're using. And here's how you could do all this in one solution or maybe two solutions with an ERP system. And then the the aha moment comes. Like, holy cow. Like,

I could be real time. I could hold people accountable. Right. I could I could see which orders are gonna be late. I could publish my financials, you know, right away, right? I could do landed cost. Then it's like, wow, okay, yeah, we need to go down this road. We have to get away from people using their own software or whatever they're using in their own departments.

Emily Browning (17:08)
It be great to hear a little bit more about that because clearly there's a lot of hidden cost in choosing those different solutions. And I can imagine that it's not really seen with any of those individual decisions. then especially is it all kind of compounds together? But I also can see the point of, but isn't ERP really expensive? How do we weigh that up against what's going on in my business?

And I guess you've been there, right? Your customers have made this decision and weighed up the cost and decided that it would be worth it.

Nirav Shah (17:36)
Yeah.

Yeah. And I think that's one thing we do really well in our sales cycles when we talk to customers and we evaluate what they're doing right now. We obviously we know the cost of these l these other solutions out there. If we don't know it, we ask. Right. We need to understand what is what are you paying now, right? At the end of the day. But really, you know what it turns out the software is such a smaller component than the lost time and opportunity cost that they lose just by doing

manual transactions. And what we really measure in our discoveries and we go through this this process with customers is what we call a value justification. So every department they're doing something, they're putting some information in a system, one system, two systems, right? Or they're printing something or or reprinting something. They are possibly having to get multiple approvals all over the place. All that takes time and all that takes dollars, right?

Whoever works in your business, there's a cost to them, whether you pay them $100 an hour loaded, or you pay them $50 an hour, $25. There's a cost for someone to do something in the system. So we start kind of looking at how long it takes you to do things that are very time consuming. Where an ERP makes it almost instantaneous, right? Or at a minimum, we'll reduce the cost by 70-80%. So we actually have customers and we talk through what we call time studies through every department.

Through most of all your major processes and from entering a sales order all the way to entering cash on the other side. How long do these things take you? Right? How long does it take you to put, you know, maybe your purchase orders in your vendor portal, right? And separate vendor portals. How long does it take you to complete a physical inventory, right, in in the system, right? And how many steps do you go to? We find out the number of hours it takes to do all these different things.

And then we put it up against if you had an ERP system, something like an Acumatica, what's here, Dynamics Business Central, how much time you would save. Now we've measured something that's quantifiable, right? And we then look at, well, the average cost of this per hour is this this dollar amount. Now, even more than the software ROI, they see a huge ROI on the labor side of it. Cause if it's t if you're losing per year $175,000.

Of just, you know, inefficiency in your organization, the cost of software is gonna quickly, you know, show that that's a much more better route to go. You're gonna save more money in the long run and you'll make more revenue. Cause that's the other part that people don't understand sometimes, business owners don't understand that, yeah, this is a subscription model, you're gonna pay for it every year. Maybe you may save, you know, if you look at the labor cost and the license cost, maybe you may save.

70K a year, right? Maybe 100K a year overall, but now you're paying that license every year. But think about the time that people are saving and what you could they could be doing to get better pri vendor pricing, to negotiate higher margins with customers, add more value or necessary with your with your with your customer base, find new markets to do business in, right? Things that they're just buried in paperwork because of all these other systems. Now you open them up.

To maybe increase your bottom line by two or three times of what you're doing now in in you know in like three or four or five years at the end of the day. So, you know, that's I think that part of measuring what you're currently doing sometimes gets lost. And that's where, you know, we really focus on that to make sure we have ever and and the customer, you know, says, Yep, you're exactly right, Narav. the prospect that, yeah, we're wasting five hundred hours a week at, you know, an average cost of thirty five dollars an hour.

Emily Browning (21:05)
Mm-hmm.

Nirav Shah (21:16)
Now you can see how that could really add how that could really build up over time.

Emily Browning (21:20)
powerful stuff.

Peter Nicholson (21:22)
That's a really interesting thought. I'd never thought of doing that because you when you think about an ERP like a modern ERP, right? Which is what we if there's someone out there that would be looking at ERP, they're not buying an ERP that we know from 20 years ago. They're buying a modern system, which is very much different because there's a lot more

Nirav Shah (21:35)
Yeah. Yeah.

Peter Nicholson (21:41)
backend processes firing off based on stuff happening, right? We know this. So you can really say that an ERP now isn't just a piece of software that's useful nine to five or when the human is in front of it. It's a piece of software that is running twenty four seven. Imagine if you have a factory and you've just replaced a a worker with a robot.

Right. Now that w Rebot doesn't need holidays. It it works twenty-four seven three six five. The ERP's slightly like that. So it would be interesting exercise to take the number of hours in a year, right? Over the price of the annual subscription to get an hourly ERP labour rate.

And then match that up to how many hours are you spending invoicing, right? So if you have a AR person that's I don't know fifty dollars an hour, whatever, and they're spending 10 hours a week doing purely the raising of invoices. You're spending five hundred dollars a week just to do that. I wonder what it looks like when you take your your ERP.

you know, hourly labor rate and you go, well hang on, are you you you wanna spend fifty dollars now doing this process or do you wanna be doing it at ten dollars an hour? Right? And of course, you know, you you're still gonna have that person. It's not like you get ERP you and you fire everyone and you just got one business owner again. It's the point of which you can now get them to do other stuff, like you said.

Nirav Shah (22:54)
Mm-hmm. Yeah.

Peter Nicholson (23:08)
pricing negotiations, win new revenue. And of course you say, well if I'm gonna be paying someone fifty dollars an hour, why the hell would I want to leverage that fifty dollar an hour cost for them to do this task that now this much cheaper thing, cheaper hourly rate thing can do that.

Nirav Shah (23:26)
Yeah.

Yeah.

Peter Nicholson (23:28)
And now they can

do the things that the ERP can't, which is go to trade shows, find new business. You know, that's actually a very interesting exercise to be able to I'd love to be able to put that into calculator and see the ERP as like this 24-7 worker as an hourly rate and go, well, here's all these things you're doing. Now this 24/7 ERP worker is going to be doing this, this, this, this, this, this, this. That could really show a huge, huge saving.

Nirav Shah (23:38)
Mm-hmm.

Yeah.

Is it?

Yeah, we we also even do it the other side of it. We do the cost per transaction. So I think you bring up a great point, Peter. But you know, when we when we submit our proposals, we look at the cost of transactions. So we look at how much you paid all so far for software with your current process, you know, all the software you're currently using. Then we do this val labor value justification of how much time you're spending or wasting on extra work and redundant work that you feel like an ERP could could could save you at the end of the day. Now you got software and cer labor.

You add that together against the average number of transactions that that business does. And you can show them that super high cost per transaction based on their current system, based on their current processes versus getting into an ERP system, that cost a transaction is way lower, you know, assuming the transaction numbers don't change. Right. So we could really quickly see the benefit of that and and make a determination. Yeah, it's a this the right route to go is with an ERP system, or happens rarely.

could happen. Maybe we don't need an ERP system right now because our cost of transactions low, right? We're not having a lot of people do redundant things. We're not having a lot of extra work. We, you know, we're you know, you know, we're we're growing at a certain rate right now that you know maybe our current system could handle. Fine, whatever that is, right? But that analysis is so important, you know, to know as a small business, am I ready for an ERP? Right? What are my true costs of what I'm doing right now to justify this investment to a new ERP system?

Peter Nicholson (25:06)
Mm-hmm.

Emily Browning (25:21)
So if I'm a business owner, I'm struggling to execute my business plan in the way that I would like to at the moment. We're doing fine, but we're trying to grow and it's not quite happening. But process-wise, I don't necessarily know what good looks like. So if I'm thinking about doing this time study, these, you know, cost of transaction study, what could be some of the key processes that I should start looking at?

Where am I likely to be wasting time?

Nirav Shah (25:51)
Yeah, I think that's really, you know, I think that depends customer to c prospect to prospect and what systems that they're currently using. but it could be like you have customers in Shopify, right? And then you have to put the same customer in QuickBooks, right? and you have to do it manually. you gotta, you know, manually copy and order from one place to another place to allocate inventory. You gotta take a purchase order and you gotta manually go and

Update it on another system so a vendor could see it. Right. you got to take an Excel spreadsheet of where you when you receive inventory and manually put that receipt into QuickBooks. So there's really a lot of touch points there. in you start looking at them, but the common denominator is how many times do you touch the same data? Right. And if you touch that same data.

Many, many times over and again, over and over and over again, just to satisfy someone else's needs in that department, without the department automatically getting that information through like a an ERP system, right? That to me is a ton of wasted time. Right? Businesses should not be operating that way. as fast as businesses are moving nowadays, right, with AI, right, if you don't have a handle around that information.

And you don't have a good single source of truth, right? AI needs that. AI needs a single source of truth. And you start every department starts feeding it the data that it has all at different times. Right? I I I can't even imagine you making a decision off of that. I think it'd be too difficult. so you know, kind of look look around and look around you and and just kind of say, well, you know, where are these places that we are just

you know, touching this w two times, three times, four times and just constantly, day in, day out, right? And and the people that are actually supposed to do a specific job are really can't fully devote a at least if they can't devote 80% of their day to that specific job objective and they're only become data entry specialists and just hunting down data and just, you know, figuring out we're we're X win and we're Y went and all that type of stuff. Like, you know, I think you're I think we're ready for an ERP system here.

Peter Nicholson (27:58)
just to say this sentence again from the question just to because we've discussed a few things and I think this is important because the more we talk talk about this I realise that it's it's not so much it's a grey area but it's almost like there's there needs to be a few symptoms of the business to start warranting an ERP because the poster put I keep hearing well there's two two parts that we we we can kind of dive into. I keep hearing about ERP systems being a game changer

Nirav Shah (28:14)
Yeah. Yeah.

Peter Nicholson (28:26)
once you hit a certain size. It's two things for me there. Game changer. we know there's gonna be some things that will probably feel like a game changer on day one. Especially if you are coming from multiple spreadsheets, a few SAAS products. It's the it's the whole you telling me when they book it in that the sales order automatically releases a pick list? Like that's a game that could be a game changer, ⁓ that's the day one stuff. And then there's the game changer in terms of

Nirav Shah (28:48)
Mm-hmm. Yep. Yep.

Peter Nicholson (28:52)
what that looks like six months on, the potential growth of the business can be seen as a game changer. So one, I guess it depends on what you want to see the game changing into. but I think the other thing, I think we kind of covered this, is once once you hit a certain size

Maybe that's a misconception of the original poster and others out there that's not just when you hit a arbitrary revenue number. It's it's not when you get to a certain number of transactions. Of course, you know, we've said that you can certainly do assessment of cost per transaction. but the second point I think we want to have a look at is but I'm not sure where that line actually is. So we've just discussed a few symptoms.

But is there a point where you would say maybe not you're not ready for an ERP? Maybe, Narav, you've done plenty of trade shows and business shows around Chicagoland, and the and the wider US states. when you're speaking to these people that might be going to a manufacturing trade show, right, and you're there and they go, Whoo, what what's what's an ERP? Is there a c some kind of telltale sign

that you're like, you guys don't need an ERP? Or is there a point where now they're a prospect and you're actually saying to them, guys, honestly, ERP you're not ready for ERP or or maybe you'll never need an ERP.

Nirav Shah (30:15)
Yeah, I think that's really company to company. there's some definitely short tell signs, right? It's they don't want to change processes. They're like, no, you know, Bob here has to get, you know, his reports in Excel and you know, he's gonna double check it and triple check it, and then he's gonna put the information into the system and then he's gonna recreate another Excel spreadsheet and give it to somebody else. Like that's just our process, right? Like that

Peter Nicholson (30:38)
And then put the receipt on

the big spike.

Nirav Shah (30:40)
Yeah, yeah, exactly. Right. And and another one I've seen, you know, talking about manufacturing is a company said that we don't want production orders. We have bombs and routings, but we don't want to release production orders to the floor because we're just gonna send emails because we don't have any computers on the floor. So we can't release that. We can't create production orders. We just wanna, you know, send bomb and routing information, a drawing itself.

But no one wants to put real time labor. No one wants to, you know, actually put in what they consumed into the production order. They want to be able to do cycle counts and just reconcile inventory. Well, it's like you're missing the point here. There's a big miss here in terms of what you think an ERP can do and what you actually need, right? do you really need an ERP? I start questioning that, which we did in this one case and we told the customer, the prospect. And it could be like it could be let's say, for example, a a professional services company.

Right. Let's say you're more you're in the mortgage industry and you know you need an ERP system, but ERPs are really good for inventory, right? They're good for manufacturing. Can you use an ERP system for a mortgage company? Sure, you can, but maybe the integrations and the customizations that we have to do outweigh the cost of you buying a generic ERP system. Maybe you got to buy a industry-built ERP system for your specific industry, right? we're then we'll say, hey, you know.

I don't think this solution is actually a good fit. Maybe look at this other solution because more designed for what you do. yeah, those are all reasons possibly, you know, not to look at something more out of the box, right? And or not even look at ERP if you're not willing to change and and that type of thing, right? but I could tell you the reverse though, right? When do you do know you need an ERP? It's like, hey, you never know your cash position. That's a big question mark for you. You need an ERP system.

Right. You want to know if your technicians are po are are profitable or not profitable. You're interested in profit, right? You're confused on where you stand. You need an ERP system. Right. All those types of things, when you start asking questions top down and you have limited visibility in your business right now, but you know you need that data to become successful, you need an ERP system. Right. there's an element of change management. You know, we know this. These are big, big projects at the end of the day. every customer company thinks that.

They're not complicated. Every customer thinks that what they do is very easy. But that's in their head, right? That's in their head from the perspective of they've been doing it the same way over and over and over and over again. Now you're trying to take what they did and standardize it. That's really where the challenge comes in, right? Where you need a good partner. You need a good ERP system that could adapt pieces of what you're doing, the way you're doing it, but also add a ton of efficiency.

And making your existing bad processes better, but the change management part of it, everyone has to be on board and, you know, be ready to take on this change manager. If you're not ready to take on the change management and you want to do the same stuff that you were doing in your seven other systems, you're not ready for an ERP.

Peter Nicholson (33:29)
Is there any barriers you have to break down when you're talking to people like that though? When you're talking about, as you said, it's you know, it's change management, it's and for that reason it's business process change. is there a point where you have to explain to them

when they maybe you get people to push back that don't understand that and they see it as, well I haven't got any technical people. I haven't got any IT people to run this IT project, right? Because we're saying about it being a business change, change management, process evaluation, stuff like that. We know it this is a business process being digitized into an piece of software. But it certainly isn't an IT project. So do you have any barriers you have to break down? Are there any kind of misconceptions

you're here talking to those people that are hearing about ERP for the first time.

Nirav Shah (34:16)
Yeah, I tell them almost every single first sales call that ERP is not gonna, you know, solve, you know, the the di the direst world problems, right? It's not gonna it's not gonna solve everything right away. But what we'll do is we'll pick and choose specific areas where we wanna have the highest impact, right? And there'll be other areas where you'll see very little impact.

Of efficiency, or you may see some efficiency go down. That's just the nature. You're buying an off-the-shelf solution at the end of the day, but it's a solution that is going to grow with you for the next 20, 30, 40 years. You're not gonna have to buy another system, right? So, right off the bat, you know, we try to come up with what are we trying to solve for? We're not gonna solve for everything. We're not gonna, we're not gonna, we're not gonna be 100% automated, you know, day one, where you just take a sales order on one end and the other.

you know, comes out, you know, an invoice and and it automatically goes ahead and you know hits cash when you receive the deposit. That's not gonna happen. There's still gonna be human intervention throughout the way. So, you know, we have to come to terms on what that realistic view of what we're solving is, phase one. And then, you know, we could have a phase two plan in place. But yeah, we it's it's you know, people get very excited when it comes to ERP and they're close to signing and they see all these great things because the demo's been really great, right? And we show them what

future state could look like, but we also have to bring them back down to earth and say, yeah, but, you know, we are not going to solve every single problem right now. We're going to solve these one, two, three problems because that's where you're leaking the most cash, you're leaking the most profit. you have the least visibility, the most important parts of your businesses, right? And we want to solve that first. And the rest of the processes, they're those, they're going to be stable enough. Like AR and AP never changes. Doesn't matter the customer, right? It doesn't matter the industry.

That stuff kind of always stays the same at the end of the day. Right. The highest value you're going to get of your ROI is going to be inventory control. It could be planning. It could be the way you manage your reporting, manage your reporting, you get better reporting out of the ERP system, all that type of stuff. Immediate, immediate, right away. Impact, impact, impact, right? Positive stuff. But it's it's really the you know, other side of it. If we know that, you AR and AP doesn't change, we're not gonna focus on that. We're gonna keep things away over there. Unless you tell me, hey, Nrav, we have this big issue in our AR, AR.

Processes that we need to solve, right? Maybe then then we say, okay, let's look at that closely and solve that. So it's all about, you know, what is reasonable, right? And what, you know, change management is gonna reduce gonna give us the most reduced risk, right? Because you're always evaluating risks in these projects, right? People, product, you know, all that type of stuff. So you need to be able to, you know, reduce risk in every single one of those elements to ensure a successful deployment.

So yeah, people, product processes, right? There's risk in every single one of those. And you got to manage it, evaluate it. You know, those are the three big rocks or glass balls up in the air that we're juggling every single implementation. But if we do it right and we and and you know the customers laser focus on what we're solving, you know, we understand what they're solving and it starts up front. It starts up front at that labor value justification, right? Where where are they spending most of their money? Where are they losing most of their money right now?

Where could we we help immediately in this pr in this ERP evaluation?

Peter Nicholson (37:27)
Yeah, I think what I've taken away from this conversation is that it's not as simple as there's a line in the sand and when you reach it it's like, oop, jump over. We now are on any we need we need to move on to an ERP. There's a few things, there's some symptoms in the business that need to be evident to start pointing you towards looking at an ERP. one thing that's also in this post,

They've I thought this was interesting. They put was the so this is to people that've made this leap onto an ERP, put was the transition as intimidating as it sounds?

Or was it smoother than expected? Now, we can't open this up because we've got three and a half years worth of episodes to talk about how to make it as smooth as possible and you know, get rid of some falsehoods out there about ERP migrations. But do you think there's some kind of general misconception about it's such a painful thing to go through an ERP and 70% of them fail and stuff? Like

Nirav Shah (38:12)
Mm-hmm.

Peter Nicholson (38:27)
I I know it's easy to see hear of the big failures and you never really hear of the the the thousands that go swimmingly well. but do you think there's some kind of general vibe that you get from these people that are considering ERP that it's some kind of intimidating project to to go through?

Nirav Shah (38:44)
Yeah, I think I think it's like buying for companies that are mature, right? Not not not everyone is a mature company, right? And th and those are companies that it's scary if they jump into an ERP because they could standardize and then go off the walls really fast as well. Like, you know, startups, for example. They're hiring so faster than they could, you know, come up with good processes. They just throw everything to the wall. Like that's where an ERP could slow you down.

Right, because cause it's trying to standardize your process in a startup environment, you're doing less, you know, standardization and more let's let's do whatever we can to get this order and and get it out the door, type of type of thing. so not not every company is mature enough for that. But if you do have the process maturity to implement an ERP system, I think it I think it comes down to is, you know, we're a five million dollar company, so we should be doing ERP right away.

We should be, we should be in an ERP system like yesterday, right? Versus like a three million dollar company, they may think that they're not, you big enough for an ERP system. But I would say that's kind of false, right? It comes down to, you know, how organized is your business? How organized are do you want your team to be? Right. and I think that's a question that sometimes doesn't get answered or asked enough when evaluat ERP projects, but ERP is like the next great thing.

For businesses. it's like buying the next pair of Jordans that are coming out, right? Or the next Omega or Rolex or you know, something like that. But they realize really fast that yeah, it's great, but they really don't have the know with all to manage it correctly. So you y that that's where we come in, right? Or good VAR will help you understand that. We'll see the we'll we'll see kind of red flags.

As you're as you're talking with them, right? If the VAR is like you know, telling everybody, hey, you're always ready for ERP, then I don't know, I'd kind of question that at the end of the day. You know, I would always ask a VAR if you're out there looking for an ERP system, like, why do you think I might not be ready for an ERP system? Right. The same thing that we talked about today. Ask the VAR that question and see what they say. If they say, no, you know, every every company should have an ERP system, I would kind of question that. Like, are you sure about that? Right? I want, I'm coming to you for proper business consulting.

that really want to genuinely have you understand my business and tell me ultimately is the ERP right an appropri a right approach that we should be taking, right? And a good var will tell you that yeah, yeah, it's good. It's probably the right time for you. You needed a yesterday or you know what, you you guys still need some some time here. You this would hurt you, hurt your growth if you if you jumped into an ERP system right now.

Emily Browning (41:14)
I think in answer to that question, can probably shout out some other previous episodes as well, because ultimately that comes down to, well, is the project being managed well? Have you chosen the right implementation partner? Did you choose the right team within your business? It could go horribly wrong if you choose all of those things poorly. So there's definitely some ownership and research to be done there. And we do have episodes that also cover those topics.

the last one the last one that was released choosing an erp and i forget the others so jump in

Nirav Shah (41:47)
Mm-hmm. Yep.

Ha ha ha.

Peter Nicholson (41:53)
I well, I don't wanna look, I did have a little look through and way back in season two we did do five signs you've outgrown your spreadsheets. but I'm not gonna mention exactly which episode because we were so few episodes in it's probably awful looking back to what the podcast looked like back then. my and you know where you don't wanna cringe at something you did a few years ago, but they're out there, I'm sure people couldn't find them.

Nirav Shah (41:58)
Yeah.

Emily Browning (42:20)
We've got one on good project management a few episodes ago.

Nirav Shah (42:23)
Yeah.

Yep. Project management. We do have one. I still remember one line you said on one of those podcasts, Peter. Even though it was it was old and probably our our video editing was not us up up up to par or you know, the the way we were probably like going about it, you know, we were still figuring it out. But you said something, Peter, that I still hold I still think about this Dan and tell customers like eighty percent of spreadsheets have errors in them. Like that's a crazy fact. And you know

you're you're still running in that environment. You're just you're just kind of, you know.

Peter Nicholson (42:52)
Yep. And it it astounds

me that there's people there's an industry, there's full time self employed people that go around fixing company Excel spreadsheets. There's enough work that people have been doing it for decades and probably still will be doing it for decades, all the while that Excel's around.

Nirav Shah (43:05)
Yeah. Yeah.

They still will. They still will.

Yeah. Yeah, exactly.

Peter Nicholson (43:15)
⁓ good. So I will definitely post a comment on the the Reddit thread when this is edited and out there. But I think I think it's quite clear that it's not just a line in the sand. There's no revenue figure you get to now you need an ERP. There's no kind of size or number of transactions that says that. It's the it's the symptoms, right? It's the the day that the spreadsheet is is found to be wrong, it's the day that that weekly business meeting just falls apart because every

Nirav Shah (43:15)
Yeah.

Peter Nicholson (43:42)
Everyone's version of the truth doesn't match anyone else's. I think it's that point where you start to have to recognise signs that an ERP may remove some of this this this pain and as we said risk from the business if you continue without it.

I was tapping away at AI on the other screen? I really like this no, it's easy. Fucking roll your eyes at AI. I quite like this term that it's come out with though. It does say you don't grow into an ERP, you stop growing without one.

Nirav Shah (44:04)
Ha ha ha.

Emily Browning (44:15)
Well...

Nirav Shah (44:16)
I like it. I like it. I like it. I like that one.

Peter Nicholson (44:16)
And even Morgan meowed at that one. Isn't that right?

Emily Browning (44:18)
You

Peter Nicholson (44:21)
Yeah, it is. So so well done AI for that. but I I I hope that if there is people out there s standing and you think you're you know there is a line in the sand you're coming up to that you find this episode engaging, of course check the back catalogue of now how do you choose which ERP and

Emily Browning (44:21)
profound.

Nirav Shah (44:23)
Yeah, super. Yeah.

Peter Nicholson (44:41)
questions to pose to your potential vendor of that ERP. so have a look through, drop us a comment or message, and we can discuss it if there's anything that we haven't covered today. and we genuinely want these, right? Because

We just stumbled across a Reddit post and it's given us, I think, a really valuable episode and it's come out with a really valuable conversation as well. so make sure that you subscribe for these episodes. New episode comes out every two weeks on Spotify, Apple Podcasts, YouTube, and everywhere else that you catch your podcasts from. So just search the ABCs of ERP and beyond. And if you can't

find us still, then it'll all be over LinkedIn anyway. So you can obviously reach out to us on there as well. So thank you once again, both of you,

So with that said, thank you very much, both of you. ⁓ and I will see you both on the next episode.

Nirav Shah (45:31)
Right.

Thank you.

Emily Browning (45:34)
Thank you.

See you next time.

Nirav Shah (45:37)
All right,

excellent. Thank you.