Why do I need an ERP system as a start-up?
Summary
- Facilitation of business and administrative tasks in your start-up
- Central platform for all business processes right from the start
- Always keep an overview of key operating figures & cashflow
- Your focus remains on the essential
Start-ups focus on fulfilling their vision and achieving goals. While building your business a multitude of different processes and tools are built up. Usually they are introduced on the go without a strategy, which leads to many small tools that do not work together. Gradually, the overview of finances, processes and tools is lost, while at the same time your efficiency is reduced.
An Enterprise Resource Planning (ERP) system can help! It links the interfaces of all business areas of your company on one system. From purchasing to sales, from personnel planning to time recording, from process monitoring and accounting to inventory and warehouse management: keeping everything under control using individual tools or Excel spreadsheets is becoming more and more difficult to handle with growing orders and increasing complexity, as the processes and thus the parameters become more and more intertwined. An ERP system, on the other hand, offers the effortlessly expandable out-of-the-box solution for all these tasks and many more!
Furthermore your start-up can concentrate on its core task again! The tiresome burden of administrative and business side tasks is taken care of by the ERP for you!
When is the right time?
Summary
- After product-market fit, before your sales growth exponentially
- Do the checklist
- Automated processes help you scale
- Rule of thumb: with 20 employees and more than 100 in or out going invoices a month an ERP will be a good investment
It is difficult to find the perfect time for introducing an ERP system, as the pains of not having an ERP only kick in when it is too late. As a rule of thumb, you should look at the majority of your startup: wait at least until you have proven product-market fit and get started before your sales start to grow exponentially.
For guidance use our checklists:
Please estimate your company by answering the following questions:
- More than 20 employees [6 points]
- More than 50 incoming invoices per month (vendor bills) [15 points].
- More than 150 transactions with customers per month [6 points]
- Customers from 3 different countries [4 points]
- 5 customers from outside the EU [14 points]
- More than 5 physical products in your portfolio [10 points]
- Own manufacturing or managing of external manufacturing [10 points]
- Any compliance related processes (e.g. ISO, TÜV, other certification) is required for your business [25 points]
- More than 100 running subscriptions [9 points]
- More than 50 quotes per month [6 points]
- More than 5m€ of total funding [6 points]
If you have at least 25 points, you should schedule a free call and find out if you need an ERP system.
What are the benefits of an ERP system for my Startup?
With strong growth of a company, the workload and the complexity of the processes often suddenly starts to increase exponentially. At this point at the latest, it is high time for an ERP system to keep the ability to act quickly and agile. If one has already implemented an ERP before, then in this critical phase there is no need to search and merge the different platforms of one’s departments, to feed them into the ERP tool. On the contrary: one only makes a few small changes and the ERP adapts all processes by itself, because the processes and their links to each other, the entire production chain from ordering to customer support, are already integrated in the system. A great opportunity to save valuable time.
In addition, you always have an overview of production progress and the flow of materials and goods at a central level. An ERP system independently ensures that all conditions for smooth value creation are met and warns the controller if this is not the case. All employees have access to the latest real-time data, which they can use to analyze, evaluate and optimise ongoing processes at any time. Even automated interfaces to production machines and measuring devices are possible. In this way, there are no limits to increasing the efficiency of your company!
From the moment you start to market your product, you should have a running ERP tool to start your growing business!
If your company grows even faster than you might expect, or if you are planning a step towards internationalisation, you do not need to worry about your processes. ERP systems offer you a lot of complexity increase with little effort, without complicating the usability. You no longer need to make manual currency conversions or tax adjustments for international orders, the ERP does it for you! You no longer have to check in advance whether the contact persons in other time zones are currently available, the ERP tells you!
Do I need an ERP partner?
Summary
- Outsourcing of setup, installation, maintenance, care and extension of the ERP tool
- No additional effort for your company
- IT-Consultant brings a high degree of know-how and already knows the system
- Training and usage recommendations by the consultant
The one-time introduction of an ERP tool, as well as possible integration of extensions is up to you. However, placing the technical support in the hands of partners who are already familiar with the system offers a number of advantages. Since your business is constantly facing new challenges, you have your hands full with the management of these challenges. How you can technically integrate this into your ERP is then the task of your IT consultant, who may already know solutions from other projects.
IT consulting is interpreting between different business departments:
From management to the IT department to the user. When selecting suitable CRM, finance and ERP systems, IT consultants advise your company individually on which systems and solutions best fit your current orientation. To this end, they analyse the status of your system and the challenges it faces and combine business objectives with IT implementation.
Especially if you want to automate customer communication, for example by designing a website or by operating an online store or an online helpdesk, the out-of-the-box solutions including the necessary know-how are already available from your IT consultant and save you time and costs.
Also automation of placing orders with service providers, planning of machine maintenance, serial production or logistics fall under the point of customisation of existing solutions, where your consultant can take a lot of work off your hands.
Finally, with a consultant you have an experienced user and developer of the ERP software at your side, who not only introduces the system and makes changes and adjustments, but also trains your employees, gives advice and tips for easier operation and is available to you as an experienced contact person in the first instance for all questions.
The bottom line is once again: You and your start-up can concentrate on your business objectives
ERP myths
Summary
- Due to many examples from the corporate world (e.g. Lidl wasting 500m€ to introduce a new SAP) ERP systems have a bad reputation. Even though many pain points are true for huge corporate implementations, the challenges in introducing an ERP for a Start Up are very limited.
- If you introduce your ERP system at the right point of time with the right partner, most problems Startups face are circumvented. As described above in more detail, introducing an ERP after establishing product market fit, but before your growth phase is the best point in time.
ERP takes resources & focus away from more important projects
This argument is especially true if you have a young team with limited experience in bigger IT projects and ERP implementation. To bring the knowledge and also avoid a big strain on your resources, we recommend partnering with an implementation company that has Startup experience.
In the case you collaborate with a partner the project will be better planned, the internally needed resources are limited and the missing knowledge is gained quickly and effectively.
In the end, your ERP will also introduce standard processes that help you manage your growth chaos and save time and money from the first day after go live.
High risk of failure
ERP failure is one of the biggest risks for a Startup as this crucial tool is not available, a lot of resources are wasted and the reputation with investors is tainted. Even though about 70% of corporate ERP projects do not meet time, money or requirements goals, in our experience we are able to finish 100% of the projects successfully.
Implementation takes too long
In the mid-sized and corporate world projects tend to take 12 – 18 months and upwards for completion. This is obviously a deal breaker for Startups. Using our Quick Start methodology, which embraces parallelisation, limited requirements and a focus on core processes, we are able to complete StartUp projects after an average of about 3 month.
ERPs are too expensive or a bad investment
Startups are in a unique position: as most of the growth lies in the future, they can utilise automation significantly more effectively than medium sized companies. Saving time, especially on core & standard processes, leads to a direct decrease of future hiring. While other companies need to let go of employees, start ups can avoid building those fixed costs from the beginning. In many cases we see, this has a direct and strong impact on the business plan. Also, by hiring fewer, better educated and more experienced employees you gain additional management resources.
While normal ERP projects start at about 100k € implementation and from 25.000€ in yearly licensing fees, we accomplish implementation costs starting at 20k€ with yearly licensing starting at 5.000€.
ERP only benefits executives and management
The entire company benefits from ERP System, it improves operational procedures and boosts employees performance from manufacturing and sales department to upper management by providing them with important information for decision-making processes.
Conclusion
Even though it is a case to case decision, building processes early in your company’s life saves significant cost and lean your process structure from the early stage. While your business is growing, the amount of information that you collect is growing as well. The software should be expanding with you and be scalable and easily implemented.
As a ERP System consultancy with a lot of experience working with start up companies in different industries and stages we can help you to choose a proper ERP system for your business and tailor it for your specific needs.
