How small is Too small for CRM?

I may get a little heat for this, but here goes. The beauty of SaaS is that very small businesses, down to one-person operations, can now gain access to what was heretofore unaffordable. Take Dynamics CRM for example, until just a few years ago, large customers were the only ones who could really afford to deploy this expensive on-premise solution.

Enter the Microsoft Cloud. When Microsoft first launched Dynamics CRM Online, essentially a hosted version of their 2011 on-premise product, a single user could buy a license, and have access to the same power of the big boys. This seemed like a great idea at the time.

As a result of spinning up tons of instances for micro companies, only to have them cancel shortly thereafter (this is called Churn), Microsoft came out with a 5 user minimum. The idea being that if you don’t have at least 5 users, you are probably not big enough for CRM. With the advent of CSP (which I wrote about here), there is a renewed call for lowering this 5 user minimum. I am actually advocating for the opposite, a higher minimum, like 10 users. My rationale follows.

The number one issue for Microsoft with the SMB CRM customer is churn. Meaning they are not getting CRM off the ground, and after a month or two of paying for a service they can’t use, they cancel it. This is actually a huge problem that is only exacerbated by even smaller companies. Are there outliers? Sure, there is the rare case where a two-person company has such a high need and value for CRM that they will take the proper steps to get it launched, but those are rare. And what exactly are those “Steps”, well, spending some money is the primary one. Too many of these small operators want to buy the licenses and spend no money on deployment of any kind. They should skip it entirely as they have just set themselves on a path to Churn and a waste of their time. “But Steve, what about these small companies who cannot afford deployment help, should they be denied CRM?” Yes, and we would be doing them a favor. If they can’t afford help, then they probably can’t afford to waste two months of their own time either.

We developed our RapidStart CRM solution to provide the lowest cost method to achieve CRM Deployment and Adoption as possible, but it’s still not cheap enough for the smallest of the small. If they can’t afford our solution, then they definitely can’t afford the 4x-5x that a CRM Partner would charge them, so they will attempt to do it on their own. They will fail 100% of the time. Okay, 99.99% of the time, to allow for outliers. Microsoft does not even provide the information to partners on how to address this segment, much less to the end users. They will fail, and at least we can hope they will fail fast.

So what is the least a micro business should expect to budget for getting CRM off the ground? The number at which, if they cannot justify spending, they should skip the effort entirely and stick with their spreadsheets or post-it notes? Well, that’s hard to say, but it’s certainly not less than a few grand; and even that will probably only get them a CRM hack. $5K to $10K is probably more realistic, and I am sure the CRM Partners are shuddering at even that. Outliers excepting, I think about 10 seats is where you start seeing a genuine business need worthy of that expense. Can you make a “mainstream” case for smaller businesses? I would like to hear it in the comments below.

[info type=”info”]Non-Confidential Information Notice. This post was written by Steve Mordue who is a member of multiple Partner Advisory Councils and is therefore subject to an Enhanced Microsoft Non-Disclosure Agreement regarding information conveyed to PAC Members. All opinions expressed are solely those of Steve Mordue, and no information provided herein is subject to the NDA. Basically, Steve knows a lot more than he let’s on; He’d tell ya, but then he’d have to kill ya.[/info]

7 Comments

  1. Fighter Pilot Steve, I realize your post here is a year old, but i’m just seeing it now fore the first time; I found it very instructive. For those of us who have, say, 3 full time employees, and another 3 or 4 part-time employees, and have enough B2B customers that we feel we have outgrown “ad hoc” as a way of keeping tracking of everyone and every relationship and every deal and every contact, what tool or service might make sense for a company of our size, short of full-blown CRM? (And of course, if your position has evolved in the past year, i’d love to hear it.) Many thanks.

  2. Hi Steve,
    I would say that even the smallest organization needs some kind of account and contact management. If I look at the basic application possibilities in Dynamics CRM I would find these quite interesting as a single employed enterprise (for the reference I’m also an independent contractor after hours). Why? Take the scenario of sending a bulk email to a certain set of contacts, I would use my Dynamics CRM starting from Office 365…
    How do I manage complaints?
    Opportunities?
    And so one…

    I do agree that the out-of-the-box System Admin view is quite intrusive and needs some polishing up, but so I think it’s in al our interest to obtain higher SMB adoption.

    Also take into account that in some scenario’s an SMB starts with 2 or 3 persons but can quickly grow to 5, 10 or more…

    From the local market perspective here in the EU I see small startup SaaS providers building lightweight CRM SaaS applications with a lot of success. Why? Because they fill in the digital need the small business owner is looking for, eg. timesheets, bank/account integration (is in invoice paid or not, not talking about an accountancy application here), integration with local know accountancy/invoice programs, etc…

    Well as Dynamics CRM is a great platform, it sometimes lacks simple “local” functionality or integrations. It is here where the small enterprise starts turning away because it doesn’t have the budget to build this (for 2 or 3 users). It is here where the small business owner turns toward the third party ISV SaaS provider… Finally, we should be able to get this small business owner into Dynamics CRM Online… So I’m against the min. 5 user requirement, even a well-known SaaS competitor doesn’t have this minimum.

    Best regards,
    Philip

  3. Hi Steve, great post.

    I certainly agree with your comments regarding Churn, and clients with the wrong mindset embarking on a CRM journey.
    One lesson I’ve learnt is that I choose to work with clients who will benefit from the journey itself, and embrace it.
    Otherwise you are correct that it’s a wasted effort for all.

    I think there are a couple of key reasons why in my case I still argue for under 5 users having access to CRM.

    By turning the tables and focusing on us (the Partners) for a second you may see my reasoning.

    Firstly, we have developed a tailored solution for a specific vertical industry (Financial Services). This is a build once, deploy many type of solution. That’s making it sound simpler than it is, but yo get the point.

    Would love to know the stats on this, but my gut feel is that most Partners go from one project to the next, and do not focus on a particular vertical, or building a re-usable IP. Assuming that’s why Microsoft is always pushing for verticals etc.

    For us, we have a very quick scoping, deployment and go-live phase (in general). Training and ongoing support is another thing!Our development is focused on fine-tuning and adding to the existing solution/product, then upgrading existing clients on an ongoing basis as their CSP provider. We can be profitable without any upfront costs, but take it over the longer timeframe ongoing.

    Secondly, I have many clients that have paid for the minimum 5 x Users despite only having 4 staff etc. These guys may “see the value” long-term and maybe are not the general masses you talk about, but most of these clients have gone on to grow as a result of the platform/solution’s capabilities and now they are an 8 or 10 user account. We have helped them grow through efficiency, visibility and accountability.

    Being a CSP Partner myself I would LOVE to be able to sell under the 5 x User minimum PRO licenses for Dynamics CRM Online. I’ve got single-person businesses that are just starting out that want to use my solution and I can’t give it to them. I have faith that some of these businesses would grow to larger size, plus for brand awareness and “ground swell” I’d rather get them onto the Dynamics train, rather than lose them to any one of the myriad of competitors now circling our industry sector.

    I know Microsoft must have their reasons for a 5 x user minimum for CRM Online, mostly cost I would assume, but I think it’s a mistake to not allow for the smaller fish wanting to enter the ecosystem.

    For now the only option I can see is to go down the Partner-Hosted route, create our own cloud, with a different licensing model (SPLA) which may give us the flexibility to offer 1 x Seat like most cloud services (XERO, Zendesk, every other cloud delivered app these days!)

    There’s my two cents!

    It was great to read an article that hits so squarely at a topic close to my own heart!
    I will now checkout RapidStart as I’m intrigued!

    Cheers,
    Dan

    1. Steve Mordue

      Hi Dan, thanks for your feedback. Personally, I feel that for the mainstream micro business with less than 5 users, there are simpler, less expensive solutions out there that cater to that size business and would not require any help to get them off the ground. Obviously, when it comes to specific verticals and specific solutions for those verticals, that is a different story. But even then, that micro business must have a very high need for CRM with that specific vertical functionality to justify the cost. I would put those in the outliers category.

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