How Small Business Can Realize ROI on a CRM
If you’ve been looking at deploying a CRM for your business, you may be familiar with some of the widely touted statistics on what kind of impact a CRM implementation can have:
29% Increase in sales
34% Increase in sales productivity
40% Increase in sales forecasting
27% Increase in customer retention
Sounds great! But how are these numbers calculated? Would these industry statistics apply to my small business? How can we actually realize these gains? In this article, I’m going to demonstrate how to evaluate the upside of CRM for your business by walking you through one of the calculations you can use to determine what your ROI on implementing CRM might be and how you can actually realize these gains.
Today we are going to look at Sales Productivity. It is well known that an average salesperson spends 65% of their time on non-revenue generating activity – filling out forms, preparing documents, setting up follow ups, composing, scheduling, and sending on-going communications, liaising between departments during installation or service issues, promoting/advertising new products/services, managing their sales funnel/internal reporting etc. Implementing CRM can drastically reduce this time by:
Automating Administrative Tasks
Document Automation & E-Signatures
Organization of Leads & Opportunities
Automating Inter Department Communications & Notifications
Automating Operational Process/Installation & Service Processes
Centralized Communication to Monitor Last & Next Interactions
Centralizing & Automating Reporting & Performance Monitoring
A lot of the above can be calculated as a time spent before vs. time spent after the implementation of CRM. Now we said that 65% of a salesperson’s time is spent on non-sales generating activity, which would equate to 26 hours of a typical 40-hour workweek. That said, a CRM is not going to eliminate ALL non-revenue generating activity and we know that even if we could save this much actual working time, it is highly unlikely that it would all be replaced one-to-one with productive time. So, let’s be conservative, and say that with all of the above changes in place, we could save about 5 hours per week per salesperson of administrative time.
This, by itself, results in a (again, conservative) 20% increase in Sales Productivity. Sounds great, but how do we actually realize this gain?
Using an example of a team of five salespeople making $60,000 per year, this 20% increase in Sales Productivity could either result in:
Sales Growth – You are able to grow your sales revenue by an additional 20% before you need to hire your next salesperson. The realized return would then be $60,000 per year.
Maintaining Sales & Reducing Headcount – You are able to handle your current sales volume with four salespeople instead of five. The realized return would then be $60,000 per year.
Either way, the realized return is $60,000 per year. This is not just a one-time savings, this is an ongoing savings, which will compound as you grow your business and sales team. How can we quantify this? From a business valuation perspective, small businesses typically use a 15% discount rate to determine the value of a ongoing return – the total realized savings of this 20% Increase in Sales Productivity would therefore be $400,000.00 ($60,000.00 / 0.15).
If you were to invest $40,000 on implementing and developing a CRM system to achieve this, you’d be looking at a 10X return on your CRM Investment from the perspective of just one single aspect, Sales Productivity. It is now easy to understand (and believe) how the average ROI for CRM is reported to be 871% once you factor in all the other areas of your business.
Ensuring you see these results is not quite as simple and immediate as deploying an available CRM and providing access – if deployed where it does not fit your business you can often hurt your Sales Productivity. To get proper results finding a partner who understands your business so that the features and functionality of your system are tailored exactly to your business and operations is key. Amplify Solutions specializes in CRM for Small Business – we take the time to truly understand our customers’ business first and build custom solutions that perform. Give us a call to find out more about what we can do for your business.