Scott Scharf, CTO, is the leader of the ecommerce accounting practice at Acuity. Scott brings great expertise in technology and how to best utilize it to improve a business’ processes, and in turn, success.
One of the topics he’s very knowledgeable about is ERPs. You might be wondering what exactly an ERP is. Well, keep on reading…
What is an ERP?
From a core ecommerce seller perspective an ERP is a broad, all-encompassing term for a piece of software that essentially serves as the hub of your business. An ERP has the capability to house platforms for cloud accounting, cloud inventory, payroll, CRM, and more.
But not all businesses choose to have the overhead of an ERP.
“It’s the choice between a combined solution – all from one company – versus a best-of-breed approach, which is our approach,” Scott said. “There’s nothing wrong with an ERP. It is a decision for the business, depending on the stage their business is in.”
Essentially, you can either select each SaaS platform and set up integrations to bring them together so that each piece grows individually, or you can select an ERP, where it’s all integrated already and directly flows without translation.
So, once an ERP is all set up, it talks to the different pieces perfectly, meaning there’s no hassle on the integration side of things. But which one should you do? Well, you’re in luck – keep on reading for Scott’s advice on ERP versus best-of-breed solutions.
Do I want an all-in-one solution (ERP) or a combined solution (best-in-breed)?
For starters, it depends on your mindset as well as your expertise.
“For those sellers or people who have a developer/technical background, they might be more comfortable with the multiple tools and the fact that they can change out pieces of the engine as they go,” Scott said.
In most cases, the ERPs and cloud inventory tools that have CRM are very, very limited. Like, to the point where, in some cases, it’s not very useful at all.
But here are the scenarios in which you might want an ERP:
#1: You’re looking from growing your business from 5K to 100K to 100 million – whatever that may be…there’s a huge growth piece, and you want to start out with the right platform.
#2: You’re already in the $20-30M range, and you’re ready for that next thing that can take you to the next big growth level.
#3: You have a complex supply chain. Some of the tools, like our partner Netsuite, allow you to build some very complex integrations and nuanced behavior in a single platform.
#4: You might also want an ERP, especially like Netsuite, if you have multiple business entities – whether you have one that’s manufacturing the product and one that’s selling the product, or you have international entities. These ERP systems will bring all those companies and currencies together, breaking down complex cost-to-goods sold, too.
When should I implement an ERP?
Around the $20M mark is where people should start thinking about switching from a combined solution to an ERP. That’s not always the case, though…
“Keep in mind, it is such a significant overhead in investments,” Scott said. “Significantly more that, if you go with the lower cost best-in-breed, then you have a lot more cash flow in the business when you’re smaller to buy inventory, pay marketing…you want to run lean.”
If your business stays simple, then you should stick with the best-of-breed approach. If days of being a simple business are starting to disappear with your growth as an entity, then consider an ERP.
But, an ERP shouldn’t be your assumption – the last thing you want as a business owner is sunk cost. Take a closer look at your business model and the complexity of your business, and see if you need to pay for everything you get with an ERP.
Do I need to hire someone to set up an ERP?
Unless you have your own developers and a product manager that is capable of managing the implementation of an ERP, it’s always better to outsource.
People who you might consider hiring implement multiple ERP projects a year, so they’re familiar with the software and know how to avoid potential pitfalls. Just make sure to interview multiple partners and check references to ensure a good partnership going forward. You both need to be ready to strap in for a few months of work.
“Sellers are 100% responsible for the success of these projects,” Scott said. “You can’t just write a big check and let someone run. If you and/or a lead in your business isn’t on top of it and paying attention to it every day, it’ll go off track, no matter who you hire.”
How much, on average, does ERP implementation cost?
It can cost anywhere from $10K-30K+ for an existing platform, like Netsuite.
A platform like Odoo has close to no licensing costs, but you might spend twice or three times as much. Some spend up to $100K customizing it to their needs, but then it’s totally customized to your business.
BONUS: What is Scott’s favorite piece of e-commerce tech?
“A2X Accounting. They’re great,” Scott said. “They’re the tool we use [at Acuity] to connect to Amazon, Shopify, Walmart, eBay, and Etsy to post income, according to our accounting standards, into Xero or QBO.”
Want to learn more from Scott? Well, you’re in luck because he definitely has more that he could teach you. Sign up for one of the ecommerce accounting courses here. You can also check out eCommerceFuel’s podcast episode, “Hot Takes on the Top ERP and Inventory Tools,” here.