Do the benefits of CRM outweigh the costs for small businesses?

Deploying a small business CRM can provide incredible benefits for a business. The reality is that many small businesses either don’t use a CRM system, or use one that isn’t fit for purpose.

In this article, we’re going to take a look at the benefits of using a CRM and some of the surprising costs. This will help you make a decision on whether you should take the leap of setting up a CRM for your small business.

The benefits

According to The Economist, data is the world’s most valuable resource. Some may debate this point but what can’t be debated is that business intelligence is a competitive advantage in most sectors.

The CRM market has undergone an incredible evolution over the past ten years, and this has led to a rich set of options for those businesses looking for a CRM. From the largest multinational to a small one-person operation there are a range of tools available.

Image courtesy of www.superoffice.com

Let’s take a look at a traditional brick and mortar business that you wouldn’t immediately associate with having a CRM and how it would benefit; we’ll look at a nail bar.

Most nail bars won’t have a CRM, but it would probably help them. Let’s assume the nail bar wants to achieve a few different goals:

  1. Increase client numbers.
  2. Increase spend per client.
  3. Fill capacity at quiet times.
  4. Increase client retention.

Even a small improvement in these metrics can have a significant impact on the business’s profits; let’s look at how a CRM could help with all four.

Increase client numbers

Using a CRM, the nail bar can build a referral campaign that incentivizes existing clients to refer new clients by offering vouchers or even free treatments.

Use our free CRM selection checklist to find a CRM that meets all your needs, and to keep on-track during the selection

Increase spend per client

The nail bar could use the client data on the CRM to push out offers for products or extra services to clients who are visiting in the forthcoming week. Even a small uptake in offers can increase the average spend.

Fill capacity at quiet times

Nail bars are probably really busy at weekends and perhaps evenings, but it’s the quiet weekday afternoons that may need filling. A CRM can help in several ways: it can push out discounts to clients prepared to visit in these hours, or by capturing some basic client data it could make these offers specifically to retired clients or those that have visited at these times before.

Increase client retention

By engaging with clients through different digital channels like email and social media, the nail bar can build brand loyalty and prompt more visits and repeat business. A good small business CRM can not only capture client information, but execute these campaigns and track their effectiveness.

Here are a couple of good small sales and marketing automation CRMs that could help the nail bar:

  1. Active Campaign
  2. Pipeline Deals
  3. Intercom
  4. Zoho

Let’s take a look at some key benefits of setting up a small business CRM:

Increase sales

The nail bar covers some of the ways to engage clients and increase sales. This can work for almost any business.

Some studies suggest that for every $1 invested into a CRM system the value is $8.71. This will vary between different businesses, but it is regularly reported that data enables sales teams to perform more effectively. Although small businesses may not have specific sales teams, the principle is true – if you can understand your clients better, reach out to them with different digital campaigns and build relationships - you will likely improve sales.

Even a very simple automation like recognizing a client’s birthday with a card or small gift can go a long way to building client loyalty – and improving sales.

Improve understanding of your clients  

A small business CRM will help you collect information on your clients’ behavior. You can capture data from many channels – whether you’re using website contact forms or asking customers to fill out a form by hand, the information you collect can add real value to how you run the business.

Let’s say for example that you run a small web design firm storing information on client preferences, work completed, budget, sector, and tools used to build the site, you can then engage them in services that are relevant for their business.

Over time as you collect large amounts of data in your small business CRM, you can start to analyze the data to make strategic business decisions. For example, the web design firm may find that many of its clients are using a specific plugin on their sites that is highly profitable to manage – this realization could lead to the business increasing its focus on selling the service to install and manage these plugins.

Improve efficiency

Small business CRM will have workflow and task management systems that can help a business manage its workload.

The suite of available tools is extensive: calendar integrations, to do lists, and project management tools are a few examples of the functionality available. Even a small team can benefit from being assigned tasks, deadlines, and calendar events.

For businesses making sales that have longer cycles like a consultancy or architecture firm, a workflow can be built around closing sales. For example, a lead can be categorized anywhere in a sales funnel with actions attached to certain team members.

image courtesy of www.pipelinedeals.com

Deal with client complaints

Client service is often neglected by even large businesses; with one-third of clients saying even one bad experience of client service make them consider switching companies the stakes are high.

Time and time again great client service is capable of papering over a multitude of problems in a business - if clients feel heard they are going to be considerably more forgiving.

A small business CRM can help greatly. You can set up a support console where clients can send requests and set up simple automations that get the problem looked at quickly by the right team member.

Costs of small business CRM

The costs associated with small business CRM are less financial (although this has to be a consideration) but more related to the time and effort that goes into selection, implementation, management, and training.

Check out our free guide to setting your CRM budget including up to date pricing of the most popular CRM systems

There is a significant cost if the CRM deployed is wrong because the CRM needs to be changed which can be more difficult than starting from scratch. Let’s summarize the key costs:

Selection: the amount of CRMs available on the market is dizzying; with a huge range of feature sets and core benefits it’s very hard to distill down the best CRM for your small business. The time and energy required to make a good decision can be considerable and beyond the time constraints of many small businesses. It’s is worth spending some time considering what your requirements are before starting the search.

Implementation: getting the CRM operational will take time (no matter how easy the sales rep makes it sound). You need to upload your data and set filters and parameters that are key for your business. This task should be approached incrementally – add in the data and necessary functionality first – once you’re comfortable with the CRM then you can start to include other functionality.

Management: even the most well-optimized CRM will need to be monitored with some regularity. Also, if team members are using the system, you will need to audit the CRM to check it is being used in the right way. Over time it is likely you will change how you use the system, and new protocols will be introduced – all of this work to ensure the ongoing effectiveness of the system will take time.   

Training: whether it’s just the owners of a business or a small team, everyone will need to be trained in how to get the most out of the system. Team members are likely to have differing capabilities in the system, and there may be some resistance to its deployment. The time taken to get everyone up-to-speed, make sure they stay up-to-speed and onboard new employees will take time.

Weighing up the costs with the benefits

Although most businesses will benefit from a CRM, you need to examine if a deployment is worth it for your business.

The first part of the equation is to calculate the expected cost of deploying a CRM.

  • Cost of monthly license
  • Cost of hosting
  • Cost of any consultancy or training required
  • Time taken to select the CRM 
  • Time taken to set up and implement your CRM 
  • Time taken to train employees
  • Time taken to manage and update CRM 

Then look at how much revenue you expect to generate from the CRM. Be specific with statements like “I believe our CRM will generate three extra customers per week and this will be worth $xx.” You can also calculate this in terms of time saved.

The final calculation will be:

(Additional Revenue + hours saved) – (cost of license/hosting/training + time taken to select/implement/train/manage)

For some businesses, the cost won’t make sense but for most small businesses implementing a CRM can be a real game changer.

Expected returns from CRM for small business

Businesses should see at least a 3x ROI from a CRM – for some businesses it can be up to a 10x return. As discussed for some businesses it will be under 3x and even a negative return, but this is generally for businesses that are already at capacity for revenue or have very low technical skills.

More and more small businesses are tapping into using a CRM system – the low cost of CRM, huge selection and advanced feature sets mean there is a great CRM solution for even the smallest business. If you are thinking about taking the leap, we advise spending a lot of time at the research phase – considering exactly what you need then taking time to analyze the available options before deciding.

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Doug Haines

About the author…

Doug Haines has worked on a variety of CRM implementation projects and now writes on a wide range of topics. He is a regular contributor to Discover CRM

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Doug Haines

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